There’s an ugly truth in our industry that we don’t like to admit, much less talk about. It’s a personality trait that often becomes ingrained during good markets when it’s easy to be right.
It also becomes ingrained when we've done a decent job of protecting our clients' assets during a downturn or crisis. It makes us think that we’re better, brighter, and smarter than anyone else, particularly our clients and our differently regulated competitors.
It’s a trait that can give us a false sense of expertise and it can cause us to lose business.
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Take the current debate about the fiduciary standard. That’s a great cause that can make many those on the investment advisor side think less of their registered rep/broker counterparts.
Reps work at the big wirehouses. They are currently not subject to the fiduciary standard, only to what is deemed suitable within their clients’ stated goals.
Fact is, wirehouses still control over half of the investible assets in the US, despite the fact that they have been losing market share over the past few years. And the big firms are masters at adapting to and adopting what’s working in the RIA and family office spaces.
A new firm, Advizent LLC, is being created specifically with the goal of educating investors on what it means to be a fiduciary. Regional firms, banks, and insurance companies are all trying to get in on the family office and independent RIA service model.
Advizent has gone so far as to tap John Bogle, founder of Vanguard Group Inc. to help draft standards of excellence criteria that would serve to identify those firms functioning as true fiduciaries.
We should all be aware of a clear warning signal in the practice of our expertise. The minute we find ourselves feeling comfortable in our position of so-called authority is the minute we begin to lose our effectiveness and the minute we become less competitive.
Realizing that wirehouses will do everything they can—whether or not we think it’s a legitimate level of service—to boost margins and market share will keep us ever vigilant. It will incite us to sharpen our message, further distinguish ourselves in the marketplace, and strengthen our brands.
The age of generalist expertise is over. We have to hone in on what sets us apart
and communicate that message loudly and clearly. We have to effectively recruit younger people into our businesses and we have to stop resting on our laurels, thinking we’ve found the formula for success.
That formula may have worked for us in the past but the components have now changed. We have a golden, once-in-an industry lifetime of opportunity to effect change in the way clients are served. If we think the competition is going to just stand by and let us do that, we’ll get left behind in the dust.