When it comes to the Department of Labor's fiduciary rule, financial advisers continue to feel considerable uncertainty driven by the recent complexity of presidential directives and federal court decisions.
Beyond the general sentiment of DOL overload, the potential for prolonged further uncertainty about the rule's future reinforces the importance for independent financial advisers to build practices that can thrive regardless of the regulatory outcome.
As a starting point, it's reasonable to assume that the industry's future will not belong to those advisers who operate on a product-centric and purely transactional basis.
Instead, our future will be defined by the need for advisers to focus on financial planning and personal finance coaching to deliver a truly advice-centric experience that helps retail investors meet their life goals.
With this in mind, independent financial advisers should look closely at doing the following:
1. Adopt digital investment systems that integrate seamlessly with your business. While it's become increasingly clear that robo-advisers cannot replace the value of a real adviser's experience and judgment, many of the underlying robo-adviser technologies that have recently emerged can add significant value to an adviser's practice. Today, the goal among advisers should be to smoothly integrate digital investment technologies into every client relationship, so they can maximize their ability to focus on adding more strategic value to their client relationships, and to do so on a more scalable basis.
A good place to start is for the adviser to keep a careful log of his or her day-to-day activities over the course of one or two months, with particular attention to how much time these various activities require. From there, make a checklist of what tasks are time-consuming yet routine in nature, and not of strategic importance to your client relationships. These are the tasks that advisers should seek to automate by deploying technology systems, thereby liberating more bandwidth for client-facing and strategic activities.
2. Continue to deliver a diverse variety of investment management products across both the fee and brokerage channels. Much of the debate surrounding the DOL rule has focused on adviser compensation models and whether brokerage-based activities shortchange retail investors. Predictably enough, this has resulted in a shift of adviser business models towards a more fee-based approach. While this transition has made a great deal of sense in many ways, some advisers have taken things a bit too far by abandoning their dual registrant status entirely and becoming fee only.
With the retail investor landscape increasingly defined by smaller account sizes among millennials and a greater need for yield among baby boomer retirees, brokerage accounts that easily accommodate smaller investors and brokerage products geared at supporting income generation will remain important.
3. Affiliate with a firm that serves as a true facilitating partner for the delivery of financial planning and financial coaching capabilities. Building a practice that is immune, to the extent possible, from regulatory change isn't something that most independent advisers can accomplish by themselves. It's important for advisers to align with a firm that strikes the right balance between investing money in bells and whistles of questionable value to the adviser, and a no-frills approach that emphasizes maximum payouts and minimal investment in adviser support tools.
Instead, advisers should first ensure the leaders of the firm with which they are affiliated accept that the industry's future will almost definitely look very dissimilar from its past. Among other things, it's crucial that advisers make sure the firm with which they are affiliated is committed to supporting a financial planning and financial coaching approach to create an advice-centric experience for their clients.
The most successful advisers of the future will be those who recognize that change in our industry is a constant — whether it's driven by regulatory, demographic or technological shifts — and embrace the positive direction that such changes can represent when it comes to best serving retail investors as they pursue their life goals.
Adam Antoniades is president of Cetera Financial Group, a leading network of independent firms supporting the delivery of retail financial advice.