Don’t count the wirehouses out yet: Charles Goldman

The wirehouses are finished — everybody’s going independent.

Don’t believe it; it’s a myth, Charles Goldman, co-founder of Advizent LLC, told a room full of RIAs at the MarketCounsel LLC conference in Las Vegas yesterday.

“Their business model is broken, but they still manage more than half the investible assets in the country. That’s a big number,” said Mr. Goldman, who formerly was president of institutional platforms at Fidelity Investments and a leading executive at The Charles Schwab Corp.’s institutional business.

While the large Wall Street firms have been losing market share for several years — with some of that business going to the approximately 17,000 registered investment adviser firms in the country — Mr. Goldman warned advisers not to get complacent.

“You’re not the only game in town winning,” he said. “Regional brokerages, banks and insurance companies are all taking share in the industry.”

Mr. Goldman, technology expert Chris Gibbons and Steven Lockshin, chief executive of Convergent Wealth Advisors, launched Advizent this year with the aim of educating investors about the meaning of fiduciary investment advice. The firm tapped Jack Bogle, founder of The Vanguard Group Inc., to lead a board that has drafted “standards of excellence” to identify firms that function as true fiduciaries. Advizent is aiming to provide a “Good Housekeeping seal of approval” in the advisory industry, said Mr. Goldman, and already has signed up 110 RIA firms as members in the organization.

The challenge for RIAs is to develop more-powerful brands and to better communicate what they do for customers, Mr. Goldman said.

“There’s a lot of confusion about what you do and how you do it. Most of your customers probably think you’re a broker,” he said. “Sixty-six percent of investors with a financial adviser think their provider is a fiduciary, and it’s not true.”

Mr. Goldman highlighted three problems RIAs need to solve to sustain their businesses and current momentum.

Growth is at the top of the list. “Young people don’t want to be involved with something with no growth,” he said. Better marketing is the solution, but the industry has little experience with it, Mr. Goldman said. “We don’t do marketing and we’re not geared for it,” he said.

Beyond that, RIAs face the growing cost and complexity of technology and regulatory compliance. “Good people are expensive and hard to hire,” Mr. Goldman said.

Further, advisers must address succession planning, he said. With the average adviser well into his or her 50s, firms need to address how they’ll continue to serve their clients and expand their businesses. “Succession means something different to everyone, but it’s something we have to solve for our clients,” Mr. Goldman said.

And don’t count the big brokerage firms out. “The wirehouses are changing. They’ve co-opted the idea of the fiduciary, and they’re going for fee-based business,” Mr. Goldman warned.