Advisers in the driver's seat when considering products, services for clients

Movement toward fee-only structures raises fiduciary bar and providers need to respond, panel says

Apr 2, 2014 @ 3:26 pm

By Trevor Hunnicutt

The dust from the regulatory shakeout after the financial crisis is still settling, but today, firms that sell products and services to advisers need more than ever to demonstrate value by helping them navigate their evolution to fee-based services.

“I don't think the client understands what the meaning of fiduciary is,” but they are showing signs of wanting more independent thinking from their advisers, said Mark Pennington, a partner at asset manager firm Lord Abbett & Co., noting the move of assets and advisers into the independent and fee-based space. “Distribution companies like ourselves in the asset management business have to respond.”

Mr. Pennington said that some of his competitors have a self-defeating tendency to see registered investment advisers as one in the same as brokers.

“Ok, maybe RIAs didn't reinvent modern portfolio theory, but if you have a client who says, I'm an RIA and you see on their shirtsleeve fiduciary, they're wearing it on their shirtsleeve, and you say, oh, they're just the same, it's probably not going to turn out too well in the long-term relationship,” he said. “You're telling the client they're not different and they think they're quite different.”

The regulatory environment since the financial crisis — in particular the debate reinvigorated by the Dodd-Frank financial reform law — hung over a conversation about the growth of the independent RIA and so-called hybrid-affiliation model on Wednesday at a panel organized by the Money Management Institute, a trade group of managed accounts providers.

Efforts by the Securities and Exchange Commission, the Labor Department and the Financial Industry Regulatory Authority Inc. to enact that law and other regulations is creating opportunity for firms that sell to financial advisers to deepen their relationships with those clients.

“If you can bring a solution to them that will stave off or at least make it a little bit easier to navigate those fairly complicated waters of ERISA, the Department of Labor and, more recently, Finra's reach into the advisory space, you'll be doing a great service that won't be forgotten,” said Michael Bryan, who directs advisory services for Triad Advisors Inc., a broker-dealer and registered investment adviser.

Mr. Bryan said the regulatory environment is driving a lot of the choices advisers are making.

“I wish I could tell you that advisers are doing nothing but focusing on how to better serve their clients, but that's not the reality, is it?” he asked.

The regulatory environment is moving the needle for brokerage firms too, according to an executive for Pershing who works with independent broker-dealers to retain advisory business.

Michael Partnow, a director at the clearing and custody firm, said he sat in a management meeting in which a broker-dealer executive called in his staff and said, “We need to stop referring to ourselves as a broker-dealer and start calling ourselves a wealth management firm.”

“[Accounts] are leaving these firms and going to the primary third-party custodians in the marketplace so what these broker-dealers are doing is forming affiliations with them for top-producing [investment advisory representatives] that are looking for a service, particularly practice management or individual business consulting that they just don't want to invest in right now,” he said.

He recommended that firms looking to develop their distribution networks consider working with more than just heads of product, but also heads of advisory strategy, transitions and recruiting, who are on the front lines of dealing with advisers or making changes to their platforms to support the switch in branding and offering to wealth manager-style services.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Nov 13

Conference

Best Practices Workshop

For the sixth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video

Events

3 Questions to ask yourself when making your succession plan

Michael Futterman from Janus Henderson Investors has sage advice for advisers as they approach retirement.

Latest news & opinion

Morgan Stanley CEO is happy that brokers are staying put

Firm has seen little attrition since it dumped the broker protocol last fall, Gorman says.

Bills to reform adviser regulation, increase sophisticated investors and protect seniors pass House

Measures included in package of 32 bipartisan bills meant to ease rules, spur investment

Genstar Capital buys majority stake in Cetera Financial Group

The private-equity firm has previously invested in such companies as Mercer Advisors and AssetMark.

Cetera Financial Group close to announcing its acquisition by private equity

Details of sale to one or more P-E firms could be announced as early as today.

10 best states for retirement

When it comes to places to retire, here are the 10 best states for enjoying your golden years.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print