From the Publisher: 2017 Will Be Momentous for Advisors

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After a daunting year for forecasters of all stripes, political and financial, I am plowing ahead fearlessly, if not foolishly, with my forecasts for the advisory community in 2017.

  1. Identities Will Merge

The classifications Wirehouse, Regional, Small Brokerage and Independent have littered the retail financial services landscape for decades but 2017 may be the year the confusing distinctions are put to bed. They have become totally arbitrary and, in fact, damaging to the industry when the language seeps out to customers.

Terminology is at a turning point because retail investors and, more broadly, all consumers are being sensitized to issues of fees and quality as forces like the fiduciary rule grab attention in Congress and the mainstream press. Firms have to get better about defining themselves and forcefully spelling out unique qualities to the public.

Cultural and operational differences determined by size and business philosophy will continue to exist but there is no need to squeeze them into categories. As the judge said about pornography, we know what makes firms honorable or cheesy when we see them.

  1. Commoditization Will Make Things Harder

There are differences in sizes of firms but products have become commoditized, as have operational areas ranging from compliance to marketing. RIA custodians and service aggregators such as Dynasty Financial and HighTower Advisors can provide customized products, technology, customized pricing and investment options on a level more or less equal with major firms. There’s little difference anymore in actual capabilities, whether you’re at a big-name firm or a billion-dollar RIA. HighTower had its biggest recruiting year to date, and added a half dozen RIAs to its platform. Look for other registered investment advisory firms to aggregate assets and combine to maximize potential savings and achieve greater cost effectiveness.

The brand name of big banks still have cachet, of course, though a prestigious parentage can also backfire (just ask a Wells Fargo Advisors broker). Names such as  Merrill Lynch, JP Morgan and Morgan Stanley still resonate with many clients as bastions of elite portfolio management and investment security but the tides are shifting.

In 2017, so-called national firms such as Stifel Nicolaus and Raymond James Financial will further imprint their names on the national retail investor landscape. A look at our Recruiting scorecard showcases the wire conundrum. They hired big producers and gathered voluminous assets in 2016, but lost an even greater number to the competition.The “new national” firms made smaller gains, but were better at retention. If they can continue to attract big brokers from, dare I say it, wirehouses, they will be forces to reckon with.

  1. Regulation Will Be Mother to Invention

The DOL fiduciary rule may, ironically, be the accelerating force that big firms have long been waiting for (if the new guys in Washington don’t repeal it). Large distributors will likely extract even more vig from big fund companies while giving less to brokers (so long 12B-1 fees!). Their recruiting bills, meanwhile, should drop significantly due to the rule’s prohibition on back-end payments.

Merrill has been splashily advertising its wholehearted support of the “best-interest standard,” another way that its parent Bank of America can lower costs by steering commission business to its Merrill Edge “robo-like” unit.

For brokers and headhunters, 2017 is likely to be a difficult year. More advisors than ever will stay in their seats, calculating  how to work with customers under the new standard while recalculating downward their personal budgets.

  1. Retirement Parties Will Be in Vogue

Regulation, capped by the DOL fiduciary rule, has made life increasingly difficult for firms and advisors. I sympathize with the many well-meaning and effective brokers and RIAs who have always looked out for their clients but who fell hobbled in doing what they like best — advising clients on what they believe are good investments. The job just isn’t fun anymore, and a lot of smart people out there will likely be spending their time managing their own portfolios (using robos?).

The Trump emissaries to the financial community have vowed to decrease regulation that stifle productivity, but it remains to be seen how that can be done in the wealth management space without stirring outcries from consumer advocates and some politicians. The Trump folks are well aware of the DOL dilemma but I’m not willing to forecast how they will square the circle. Meantime, we’ll be watching to see how the big firms try to distinguish themselves from each other and their many other competitors.


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Tony Sirianni
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