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This Practice Management article is intended for financial advisors only (registered representatives of broker/dealers or associated persons of Registered Investment Advisors).
Is "independence" dead?
A trio of top custodial executives discussing big trends for the RIA sector downplayed the term—at least as a marketing advantage—during a panel session at the 2014 MarketCounsel summit in Las Vegas in December.
“I don't know if we can keep defining ourselves as independent," said Fidelity Institutional Wealth Services president Mike Durbin. "What is independence? We need to continue to define our relevance."
Schwab Advisor Services head Bernie Clark echoed the concern. "Independence may not be enough to sell [the RIA offering] in the future," he said.
Forecast: More RIA Takeovers Ahead
One challenge: As independent advice becomes more valuable, larger players are moving in on the space, buying out firms—as in Boston Private Bank & Trust's blockbuster $60 million deal for Banyan Partners in July—thereby eliminating that independence.
"I think you will see a wirehouse buy a big RIA within the next 10 years," predicted the panel's third member, Pershing Advisor Solutions CEO Mark Tibergien.
Such deal making will raise a question, he noted: "Are you talking about independence of ownership or independence of thought?"
Switch to Fiduciary?
Like other speakers over the course of the three-day event, the custodial executives suggested a fiduciary standard as a differentiating factor—even saying they intended to work together to boost awareness and education, which Clark said were "among our biggest challenges."
Even the phrase "investment advisor"—once an indicator that a planner was governed by the 1940 Investment Advisers Act—has lost its currency as a signifier to consumers, executives lamented.
"The word ‘advisor’ has been purloined" by wirehouse brokers, Tibergien said. "We need to stand up to that abuse of the language.
When someone is becoming an RIA, they are fundamentally changing their business models… becoming client advocates instead of product advocates," Tibergien added.
The growing number of RIAs over time has, in itself, become a branding challenge, noted one attendee.
"It used to be easy to say, 'I'm independent, I'm objective'—that was your value proposition," says Halbert Hargrove CEO Russ Hill, who cites his four-digit CFP ID number as proof of his longevity in the industry.
"I don't think that's enough anymore," he added. "We're all going to have to figure out how to explain why we're better than everyone else."
- Rachel F. Elson
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The information provided is for general information purposes only and is not intended to be legal, tax or investment advice. The information contained herein has been provided by sources other than Lord Abbett which are believed to be reliable; however Lord Abbett cannot guarantee the accuracy or completeness of this information.