The wealth management industry at a turning point

From changing client needs to new regulations and technologies, top leaders weigh in on where the industry is going

Apr 7, 2014 @ 12:01 am

For the first of a series of special reports on the Crossroads the financial advice business is facing, we posed one question to top industry leaders: What turning point do you see the overall financial advice industry facing at the current moment? Here is what they said:

"For too long, wealth management firms have focused too heavily on the performance of the S&P 500 and other benchmarks — the how and what of our business — and too little on why we're in this business. While performance is always important, at its simplest, our role is to help clients and their families reach their life priorities for each stage of their life. As an industry, we need to talk and interact with clients on their terms, in their words, and focus relentlessly on what they want for their lives."

John Thiel
Merrill Lynch Wealth Management

"One big dynamic we see is the growing demand for truly objective advice. Investors want advisers that are free from bias, and advisers want the freedom to do what's right for the client without regard to quotas and, increasingly, without regard to commissions. A related dynamic is the integration of increasingly affordable technology, which drives down costs for advisers and in turn gives them the flexibility to operate on platforms that allow for truly bias-free, objective advice."

Mark Casady
Chairman and CEO
LPL Financial

"As our industry emerges from a financial crisis and a number of mergers, we are at a crucial point for transforming the client experience. A key factor in that transformation is innovation. Customer expectations are evolving; they want it to be easy to do business with us when and where they want. We plan to use technology to extend the advice of our financial advisers. New and improved technology will help us better serve clients who are near retirement or in retirement, as well as help us reach the next generation of wealth in our country – the emerging affluent investors. The impact of Millennials in 30 years will be as significant as the Baby Boomers' impact is today."

Mary T. Mack
President and Head
Wells Fargo Advisors

"As traditional training programs become scarce and more advisers begin to retire, we need to find ways to recruit young talent to the profession. This is especially true of women, who are woefully under-represented in the ranks of financial advisers. With research showing that women are controlling more and more wealth, we really need to attract more women to the industry."

Erica McGinnis
President and CEO
Advisor Group

"An industry of baby boomers advising baby boomers is predictably facing a turning point. The fact is, less than 6% of advisers are under the age of 30. With thousands of independent investment advisers getting ready to retire, we need to make succession planning and cultivating new advisers our top priorities so RIAs can serve future generations of investors."

Tom Nally
TD Ameritrade Institutional

"Age is fast becoming a major issue — the age of our advisers, the age of our clients and the increased longevity of our clients' parents. As a result, client needs are changing, and it's transforming how we approach wealth management."

Robert Mulholland
Head of wealth management and investment solutions
UBS Wealth Management Americas

"The industry is at a tremendous crossroads — there are more opportunities to succeed and dramatic distractions to fail. The market has become a meritocracy — if you're not adding value, you're not going to get paid. This is not only driven by the Internet and social media but also by the next generation and their influence on the traditional generation."

Ron Carson
Founder and CEO
Carson Institutional Alliance

"Competition … will increase dramatically as wirehouses finally begin to offer substantive retirement-planning advice, breakaway brokers develop large, sophisticated competitive practices and a number of independent RIAs grow dramatically by absorbing smaller practices."

Harold Evensky
Founder and president
Evensky & Katz Wealth Management

"Exponential technology. Radical and fast-coming innovation will sharply alter the advice we give and how we give it. Most advisers are not prepared for what's coming."

Ric Edelman
Chairman and CEO
Edelman Financial Services

"Competent, objective financial advice is finally becoming available to all people, thanks to advances in technology and progressive thinking. When our industry serves all Americans, as fiduciaries, we have emerged as a profession."

Sheryl Garrett
Garrett Planning Network Inc., Garrett Investment Advisors

"In this burgeoning era of digital advice, firm leaders will have to look at their balance of 'technology versus touch.' What components of your client value proposition can be digitized or automated, and what parts can only be delivered through human interactions? It is the latter that will keep advisers relevant and continue what we see as a bull market for financial advice."

Michael R. Durbin
Fidelity Institutional Wealth Services

"Today's retiree not only faces irrevocable decisions about their own retirement plans but must deal with aging parents' needing various levels of care and young adults' needing support in a weak job market. Today's financial planner is facing a decision of whether to remain more of a generalist for all ages or choosing to specialize in areas pertinent to this 'sandwich' client profile where expertise in withdrawal strategies, Social Security, health and geriatric care, and career asset management are all integral to planning for the future."

Janet Stanzak
2014 President
Financial Planning Association

"We now stand at a crossroad, with one generation of investors looking to maximize retirement security in the face of much longer life spans and an emerging generation of investors entering a world in which they are cognizant that they, increasingly, are ultimately on the line for their financial futures. The industry is rising to help them meet these challenges, and a plethora of advice options are appearing. The critical question now: Which advice options truly put the investor's best interests at the center?"

Bernie Clark
Executive VP and Head
Schwab Advisor Services

"Attracting young and diverse advisers is critical to the future of our profession. For example, currently, only about 23% of CFP professionals are women — a statistic that has remained stagnant for a decade."

Kevin Keller
Certified Financial Planner Board of Standards Inc.

"Investors need to know that they are protected by the same standard of conduct when receiving the same type of personalized investment advice, whether from a broker-dealer or investment adviser. The SEC should establish a uniform fiduciary standard for both types of advisers when they provide this type of advice. Importantly, the SEC should accomplish this by writing a rule that not only protects the investor but also protects the investor's choice of service, by being business-model-neutral as Congress intended."

Ken Bentsen
President and CEO
Securities Industry and Financial Markets Association

"Our industry now faces three crossroads at once. First, there is the rise of self-directed, web-enabled tools that offer ridiculously low pricing, while younger investors are not wanting to work within the traditional financial services model. Second, the replacement of the 'yellow pad' by the iPad, in terms of delivering guidance with gamification, is going to increase. Finally, the rise of national firms with scaled, technology-powered client delivery systems will redefine the investor experience."

Joe Duran
United Capital

"Many processes and protections in our industry depend on clients' signing hard-copy forms — new agreements, acknowledgements, etc. Technology has enabled more convenient, more efficient and less expensive data collection and processing options preferred by a growing number of advisers and clients. For the vast majority of firms it requires a complete overhaul of long-standing processes. The required renovation expense and time investment may cause some firms to exit the business rather than incur the costs."

Scott Curtis
Raymond James Financial Services Inc.

"Demographics remain as attractive today for our industry as they have ever been. More investors moving into retirement means a greater need for professional guidance."

Jim Weddle
Managing partner
Edward Jones

"Now at $3 trillion, the rapid growth experienced by the managed-accounts industry over the past decade will continue, as clients like what it offers: a rigorous discovery process to determine goals and risk tolerance, investment discipline that includes allocation across a wide spectrum of asset classes and ongoing due diligence, and the option of discretionary management. In this context, many investors will conclude that their interests are best served by maintaining both advisory and brokerage accounts."

James Tracy
Head of Consulting Group
Morgan Stanley Wealth Management

"We expect 2014 to be a very good year in the advice business: RIAs will continue to gain market share from the wirehouses, mainly based on client movement. In addition, more brokers will leave to create independent RIAs, and we will see significant merger momentum in the industry. With the emergence of attractive retirement- and succession-planning models, advisers now have more choices to protect their clients, colleagues and families."

Rudy Adolf
Founder and CEO
Focus Financial Partners

"The financial advice industry is going through its most profound change in decades. This is driven by demographics, regulatory pressures, consumer sentiment and a desire for young people to do things differently. The change will feel evolutionary, but once we are through the next five to seven years, we will likely see more large RIA firms, fewer smaller broker-dealers and an age demographic focus shift from boomers to Gen X and Millennial advisers and clients."

Mark Tibergien
Pershing Advisor Solutions

"The fiduciary discussion is a great academic argument, but it's really similar to cigarette smoking and how cigarette laws changed. What happened around the cigarette laws changing in the industry was not because everybody's ethical compass changed and people said, 'Oh, cigarette smoking is bad for you, and we should put restraints to protect kids and pregnant women, etc.' What happened is the grass-roots effort of the medical community and the grass-roots effort of the people said we need to do something."

Elliot S. Weissbluth
HighTower Advisors


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