The Shifting Sands beneath Us: Notes from the FSI OneVoice 2017 Conference

The Shifting Sands beneath Us: Notes from the FSI OneVoice 2017 Conference

Independent Advisors

Published February 1, 2017

As I sat in a crowded conference room in rainy San Francisco last week, I looked around in amazement at how much industry talent had come together to attend the Financial Services Institute’s OneVoice conference. My round table comprised two CEOs of major brokerage firms and the female CEO of a large asset manager in the US. We engaged in a heavy discussion around how best to provide support to independent financial advisors.

In previous years, this conversation would have likely revolved around how new technology could enhance an existing robust offering, or perhaps how to help advisors grow their practices through both organic and inorganic measures. But in today’s climate, the conversation is a bit more complex. Each of us in the room is desperately trying to determine the best course of action to take in light of the looming – maybe – DOL fiduciary rule deadline date.

In an effort to introduce more transparency into the challenges and proposed solutions facing independent broker-dealers today, I will highlight some of the key areas of our conversation.

Scalable Firms Will Survive

Size matters more than ever in this new world, a fact that further validates the application of Darwin’s evolutionary theory to our industry. Only financial firms with the deepest pockets and the means with which to comply with the new rules will survive. Survivors will include the largest broker-dealers and RIAs, or those firms that have the capital to invest in technology to make their firms cost-effective and efficient. Smaller firms will be gobbled up or simply disappear.

Customized Solutions for Independent Advisors

Paradoxically, independent advisors want customization along with scale. They are seeking customized solutions to help them with their unique businesses, and independent broker-dealers must come up with ways to appeal to the independent advisory model. As my former boss, Tom Bradley of TD Ameritrade used to say, “Independent advisors are like snowflakes. No two of them are alike.” Independent advisors want choice and options. They each run their businesses differently, manage a unique set of client relationships and have a different way of communicating, investing and planning. Large firms need to scale on the back end while providing choice on the front end.

Growth, Succession Planning and Next-Gen Advisors

There is a growth crisis in the advisor marketplace right now. With an aging advisor population and fewer young professionals entering the industry, it is more imperative than ever to put resources toward sourcing and employing the next generation of advisors. Some ideas with resonance include training young professionals at the home office for a specific period of time before sending them out to work in the offices of existing advisors, or offering formal internship programs like the one we launched at Private Advisor Group last year. Firms that succeed in bringing younger advisors into the fold will win in the end by providing their existing advisor force with workable succession plans.

Next Gen advisors have specific needs they want met before they will even contemplate a career in the industry:

  • No cold calling (in the everyone-gets-a-trophy generation, rejection is not easily digested)
  • Advanced technology, specifically CRM
  • A career path that goes out a decade
  • Fee-only advisory firms (commissions carry a negative connotation in the Next Gen world)
Attracting Next-Gen Clients

Looking around the conference room, I noticed that in my mid-forties, I was actually on the younger side of the audience in attendance. Like many professionals in this industry, we are veterans. We have been around for 25+ years. Our collective knowledge – while impressive – might not help us assist our advisors with prospecting and winning the business of the next generation of investor. Advisors must learn to embrace the very different wants and needs of the critically important Next Gen segment of the market. Hiring a younger advisor will certainly help (see the previous section), but according to a Fidelity study shared verbally with the group, younger clients want more than that:

  • Option to pay by credit card and/or phone on a monthly basis
  • Collaborative work through online channels and apps
  • Non-sales-oriented financial advisor
  • Transparency into the firm’s fees and profits
  • Different advisor from their parents

There were many more topics covered at the conference, including practice management solutions (must be actionable and executable) and product sponsorship (platform fees, levelized compensation, commissions, transition to advisory). But the conversations around scalability, customization and Next Gen were the ones that really stuck in my mind.

We are walking on unchartered territory right now, and the sand is shifting beneath our feet. On my six-hour flight home, I reflected on how much has changed since I started my career in 1992 at Sanford Bernstein. And the next two years will demonstrate an even greater shift than my entire career has seen thus far. I am grateful to be a member of an organization like FSI, which continues to partner with us in the honorable profession of providing financial advice to the investing public.