More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
This is the 10th year that Investment Advisor has published our subjective list of the 25 most influential people in and around the advisor universe, following a months-long process in which the editorial staff of the Investment Advisor Group, which includes Investment Advisor and Research magazines and AdvisorOne.com, nominated candidates and eventually came to a consensus.
In the pages that follow on this article, we list the IA 25 for 2012, with profiles of each honoree. See the IA 25 home page for enhanced profiles of this year's honorees for the remainder of April and throughout May and additional reporting on the IA 25 through the 10 years of its existence.
Our profiles begin with Elliot Weissbluth of HighTower Advisors.
Some people ride a wave, and some people create a wave. Elliot Weissbluth of HighTower is a creator and has changed the conversation on and about Wall Street and the role of advisors. His backers at the Chicago-based firm founded five years ago believed in his vision, and the many top wirehouse brokers who have bought into the HighTower approach have validated that vision.
It’s a simple approach: Clients can benefit from the intellectual capital of the biggest firms on the Street while being served under a strict fiduciary mantle. Those ex-wirehouse brokers benefit from HighTower’s growing scale and ability to force everyone from bond trading desks to RIA custodians to compete for their business. They also benefit from being part of an elite peer group that has input on who else can join the partnership, while retaining the independence to run their own specific practices in their own way.
“The old dialogue,” says Weissbluth, “which was ‘independent good; Wall Street bad,’ was never an intellectually honest discussion. There’s tremendous value and innovation on Wall Street.”
“The optimal financial services firm leverages the competitive spirit of Wall Street, bringing the cream to the top, and does that inside an independent fiduciary service model, which is optimal to the individual investor.”
Weissbluth’s role as entrepreneur and growing status as a thought leader qualifies him to lead the 10th annual IA 25 list of the most influential people in and around the advisor industry. (See AdvisorOne.com for extended profiles.)
While the SEC considers whether to extend a fiduciary duty to all advice givers, and the Department of Labor forges ahead on its revised definition of fiduciary, HighTower has moved ahead on its own, wrapping a strict fiduciary standard into a business model that meets client needs while giving top Wall Street brokers an innovative home from which to serve those clients and grow their individual businesses.
Lest you think Weissbluth’s words about the Street are all saccharine, he can also be its harshest critic. Yes, he says that the most innovative and interesting thinking comes out of Wall Street, but it’s not the firms, it’s the ecosystem, he says. “The most competitive, interesting, innovative people are drawn to the Street, because that’s where the compensation is.” However, Weissbluth says “the problem is that if you land as a client at one of the Wall Street firms, you only get access to that particular firm’s good ideas. Those firms are not set up to benefit the clients’ interests first, but to benefit the firm.” He says, “we recognized that was a growing sentiment eight years ago; we formed HighTower five years ago, because we knew a business could be formed that started with the clients’ interests first without sacrificing” the benefits of Wall Street innovation.
Weissbluth argues that the industry must “educate and clarify what a fiduciary duty is and whether [clients are] receiving it; 90% of investors don’t understand what a fiduciary duty is, but they think they’re getting it from a broker.”
Investors are entitled to an advisor who owes them a fiduciary duty, Weissbluth says; an advisor who is duty-bound and legally obligated to put clients’ interests first. “Until that happens, there will be a lot of exploitation around the fiduciary issue.” Educating investors about such a duty and who has it provides a side benefit to the client. He argues, “It’s the greatest opportunity to restore confidence.”
And who is his competition? “Large firms with multiple layers of fees and conflicts of interest should be concerned that our model will become the new normal.” Those firms that “enrich a firm at the expense of the client; they should feel threatened.” —James J. Green
Elliot Weissbluth photographs taken by Tom McKenzie for Investment Advisor.
Anyone worried about the “next generation” should talk to Amy Webber. The president and COO of Cambridge Investment Research convened the “New Century Council” in 2009 to help identify the next generation of advisors: their wants, needs, how they communicate and what they expect.
“It started with 12 advisors and has now grown to 23,” she explains. What she’s found is that the younger generation of advisors, while entrepreneurial in their own way, is far more receptive to outsourcing than their older counterparts.
“The older generation thought that being entrepreneurial meant they did it all; for them, it was what being independent really meant,” she says. “Not so with younger advisors.”
The importance of business continuity will become increasingly important, Webber says.
“Advisors realize they won’t live forever,” she concludes. “They can take care of their families through insurance and other means. This is really about how to best take care of their clients.” —John Sullivan
Charles Biderman, president and CEO of investment research firm TrimTabs, started his firm to provide real-time data on the supply and demand of stocks and money available for investment. “Since 80% of stock is owned by institutions, we track money flows in and out of institutions,” he says.
One of advisors’ biggest challenges over the next 12 to 18 months, he says, is one of odds. “In a world where mathematics say that individuals can’t beat the market, how do you invest appropriately for your client?” Biderman asks. “How do you create portfolios for the prospect of inflation and deflation occurring at the same time?”
To try to answer those questions, TrimTabs partnered with AdvisorShares to build an actively managed ETF, TrimTabs Float Shrink (TTFS). “Biderman Market Theory says that in the stock market, as in every market, the house always has the advantage over the players,” Biderman says.
“If the house has an advantage, I want to invest with the house. Our success over the years has been due to my ability to relate to what’s really going on with simple-to-understand supply and demand concepts.” —Danielle Andrus
The managing partner of research and consulting firm Tiburon Strategic Advisors employs a rapid fire delivery of critical information that industry leaders want; so much so that in addition to purchasing his services, they clamor to attend his twice-annual CEO summits.
Although Tiburon intends to remain a mid-sized, boutique management consulting firm, Roame is looking to the future in how its information is delivered.
“We used to send our reports to clients, but no longer,” he explains. “We’re building out our research topics and now sending links to our reports. [...] The client will have live access to updates as they occur, some of which are updated daily and others that are updated maybe five or 10 times a year.”
Asked about near-term trends that most affect advisors, he doesn’t hesitate in naming the issue of breakaway brokers as tops. While the overall number might not be big, the assets they take with them are, and they have an outsized impact on the independent channel due to its smaller size.
“It’s the big dogs that get the attention,” he adds. “Other wirehouse reps sit and think ‘If Mr. Moneybags is doing it, why shouldn’t I?’” —JS
Dale Brown, president and CEO of the Financial Services Institute, is a perennial member of the IA 25. He’s led the agency since its inception eight years ago. Over that time, FSI has carved out a place in the industry as a vocal advocate for financial advisors, and Brown has appeared on our list six times.
“In a relatively short period of time,” he says, “we’ve established ourselves as a strong and effective voice for independent financial services firms. We’ve had a real impact on important issues impacting members, their businesses, their clients.”
Brown is optimistic about the industry’s future, calling it “stronger than ever in the face of tremendous regulatory burden. Not a single independent financial advisor contributed to the financial crisis, and yet it’s shown investors the value of independent financial advice,” he says.
The biggest challenge for advisors, Brown says, is the continued uncertainty surrounding regulatory changes. “We support a new uniform fiduciary standard for everyone that’s providing retail investment advice, and yet we have no idea exactly what that standard will look like.”
“That makes it very hard to run a business.” —DA
Within the first minute of meeting Mohamed El-Erian, you understand why the company, and the man, is so successful. His charm immediately put our staff at ease, going so far as to joke with our German-born photographer about the pretzels in Munich and proffering a signed copy of his book. We imagine he employs this tactic in everything from meetings before the board to his personal rapport with Michelle Obama.
PIMCO’s staff efficiently briefed us on the idiosyncrasies of its CEO beforehand, helping to maximize the time he was able to give. We had the feeling this efficiency runs through the entire company, another reason for its success. Lest you think we were being “handled” (the thought did cross our mind), light security during our preparations let us come and go—and wander—as we pleased.
A cursory Google search immediately explains why El-Erian is so busy. In addition to his own book, he regularly writes for the Huffington Post and the Financial Times, provides commentary for other news outlets, does television appearances, speaking engagements, consultations with politicians and everything else that comes from increasingly sharing a role as the “face” of the company with founder Bill Gross. He is currently a board member of the National Bureau of Economic Research, the Carnegie Endowment for International Peace and Cambridge in America.
Oh, and did we mention he also runs the world’s largest bond shop?
In just the past two months, he’s made headlines for his comments about QE3 (he said it’s likely), his call for no more IMF aid to Europe, his take on the unemployment figures (they’re good and getting better) and his defense of Clint Eastwood over the Super Bowl ad controversy. He even managed to include his beloved New York Jets (no one’s perfect) in an analogy on the Greek debt crisis.
The New York-born El-Erian lived in Egypt as a child. He holds a master’s degree and doctorate in economics from Oxford University and received his undergraduate degree from Cambridge University. He first joined PIMCO in 1999 and was a senior member of PIMCO’s portfolio management and investment strategy group. He left for two years to serve as president and CEO of Harvard Management Company, the entity that manages Harvard’s endowment and related accounts, at a time when the endowment was arguably at its highest point.
Before coming to PIMCO, El-Erian was a managing director at Salomon Smith Barney/Citigroup in London, and before that he spent 15 years at the International Monetary Fund in Washington.
Despite the fact that PIMCO’s signature fund, PIMCO Total Return (PTTRX), blew a call on Treasuries and ended up underperforming 69% of its peers in 2011, it’s rebounded nicely, outperforming 79% of its peers in the first quarter and attracting $1.7 billion in new assets.
And people (meaning us) still want to know what PIMCO and El-Erian think, especially when it comes to the three biggest issues facing advisors in the near term (12–18 months).
“Helping clients navigate, to use Chairman Bernanke’s phrase, ‘an unusually uncertain outlook’ for markets and the global economy; second, keeping up with changing correlations among asset classes and their implications for asset allocation and risk management. Lastly, adapting to the changing financial and institutional landscape as new regulations are implemented and companies adjust.” —John Sullivan
Mohamed El-Erian photographs taken by Jurgen Reisch for Investment Advisor.
“Technology is the great equalizer,” Eric Clarke, president of Orion Advisor Services, says. “In our industry, technology has allowed advisors to go out on their own as independent investment advisors and still provide their clients the same level of service that the wirehouses have traditionally provided.”
Orion Advisor Services, founded in 1999, currently provides performance reporting on over $70 billion in assets and services over 275 firms.
While technology has certainly made advisors more efficient and more profitable, the most important benefit, according to Clarke, is that it’s helped them get closer to their clients. “It allows them to communicate with their clients in a much richer format,” he says. “In essence, [technology] has enabled advisors to spend time doing what they do best.”
The challenge, however, will be in learning how to put technology to best use. Advisors’ biggest challenge is “figuring out their firms’ mobile strategy,” Clarke says. “How advisors face this challenge today and how they respond to it in the next 12 to 18 months is absolutely critical.” —DA
There’s something reassuring about John Bogle’s passion and the fact that it hasn’t waned with age. We began our interview by noting what a sea change has occurred in financial services. Stung by criticism in the wake of the 2008 downturn, companies are beginning to adopt more of a “client first” position. Does he believe this to be true, or will it be “more of the same” from the investment industry?
“It will always be more of the same,” Vanguard’s founder answers. “Although I agree I’m seeing a little more movement in the direction of serving clients’ needs first.”
A bigger sea change is more personal to Bogle. The public and the media are finally beginning to “get” the advantages of low-cost indexing over higher-cost active management.
If we could trade for free then investing would become a zero sum game, he says, but we can’t so it isn’t. The more investors trade, the more investors pay, and then only the traders making the fees win.
“People are getting this, and indexed-type products that feature simplicity will win,” he says, before predicting, “This will mark the next couple of years at least.” —JS
John Peluso knows Wells Fargo, and he knows the various distribution channels, which makes him especially qualified to lead the firm’s independent channel—that’s right, a bank with an independent channel.
“The model came from a desire to attract and retain the best financial advisors in the country,” the president of Wells Fargo Advisors Financial Network says when asked about the network’s genesis. “When we started it 11 years ago, we evaluated industry trends, and it was obvious to us that the ‘best’ often didn’t want to work in a company-owned shop. They wanted to be able to choose how to affiliate.”
What differentiates the model and the network, Peluso says, is the unique intersection it occupies in the industry.
“Our advisors have all of the resources that Wells Fargo offers behind them,” he explains. “They’re able to marry that with the ability to own and operate their own business.”
Do the straight wirehouse reps the firm employs view the independent channel with suspicion?
“The franchise wins when we compete for the best available advisors,” Peluso answers, “but the advisors self-select the channel that is most appropriate for them.” —JS
Jon Henschen, president of Henschen & Associates, a broker-dealer recruiting firm, likens the torrent of regulatory changes the industry has seen recently to “having a cut on your finger, and they’re cutting your arm off to repair it.”
While the Dodd-Frank Act’s effect was largely felt by wirehouses and big banks, the independent channel hasn’t escaped increased bureaucracy that, Henschen says, is “grinding down the business.” For example, “the ‘know your customer’ rule allows broker-dealers to take a risk-based approach to implementing new suitability factors, but it’s doubtful that broker-dealers and regulators will see eye to eye on how the changes are to be implemented,” he says.
Henschen believes the fiduciary issue will affect wirehouses more than the independent channel, but altogether, it’s about surviving regulators. “One of the worst damages of increased regulations is they’re driving smaller firms out of business,” he says. “The emphasis more and more is on compliance supervision. Big firms can afford to do that. Smaller firms can’t afford it as much, especially firms under 100 reps. They hurt the little guy.” —DA
On two of the top issues affecting the investment advisory space, Mary Schapiro, chairman of the Securities and Exchange Commission, is adamant: Brokers should be held to a fiduciary mandate, and a self-regulatory organization to help the agency examine advisors must be explored.
Since Dodd-Frank gave the SEC the authority to write a rule to put brokers under a fiduciary mandate, Schapiro has been waging a battle to ensure such a rule sees the light of day.
But Schapiro told Investment Advisor in an exclusive interview in mid-March that while she’s hopeful a proposed fiduciary rule will be unveiled this year, those in the industry shouldn’t count on it being one that is identical to the fiduciary rule being crafted by the Department of Labor.
“We have talked a lot with the DOL, and we’ve tried to coordinate and work with them, but they have to operate under the Employee Retirement Income Security Act (ERISA), which is quite a different statute than the federal securities laws,” Schapiro said. In crafting its fiduciary rule, the SEC is looking at “advice about securities to retail customers,” she continued, “and so the issues we would be concerned about are somewhat different than those that DOL is concerned about under ERISA.”
A uniform fiduciary rule crafted by the agency, however, will be business-model neutral, she said—a term that has had many in the advisory community scratching their heads. But Schapiro explained that in the SEC staff report recommending that brokers adhere to a fiduciary duty that was sent to Congress and was mandated under Section 913 of the Dodd-Frank Act, the SEC staff said “that if the Commission moves forward with the staff’s recommendation to create a uniform fiduciary standard for retail customers when recommendations are made about securities that it be ‘business neutral’ so that we’re not favoring a particular model—investment advisor, BD or a particular compensation structure—over another.” Still, those in the advisory community argue that exactly how this business-model neutral approach is crafted will be crucial to determining whether the agency actually ends up putting brokers under a fiduciary mandate.
Despite being deluged with Dodd-Frank rulemakings and other priorities such as “a very big enforcement pipeline,” oversight of the municipal securities markets and post flash-crash reforms, Schapiro said that she believes crafting a fiduciary duty rule for brokers is a “very important” priority for the agency.
“I don’t know where the Commission will be on this” fiduciary rule, Schapiro told Investment Advisor. “I know that my personal view is that investors should not have to figure out based on the title on the business card of the person sitting in front of them what standard of care they are entitled to. The regulatory system should not put them in that position when [the advisor and the BD rep are] engaged in the exact same conduct.”
Another priority for the commission, Schapiro said, is ensuring the agency can adequately examine the advisors it oversees. But even after the switching of advisors with between $25 million and $100 million in assets under management to state registration come July, Schapiro said the SEC will “absolutely not” be able to adequately examine advisors.
Despite the fact that 3,000 advisors previously registered with the SEC will be switching, she said, the SEC “will take on hedge funds and other private funds so the assets under management will actually increase and our responsibilities will be greater.” Last year, she said, the SEC inspected 8% of advisors, “and one-third of advisors have never been examined by the SEC. My personal view is that’s not sufficient; we need a much greater presence.”
Said Schapiro, “I think we have to look at the option of an SRO.” —Melanie Waddell
Mary Schapiro photographs taken by Drake Sorey for Investment Advisor.
One of the original founders of NextGen, 34-year-old Michael Kitces, partner and director of research at Pinnacle Advisory Group in Columbia, Md., and publisher of The Kitces Report and the blog Nerd’s Eye View, says that over the next year or so, advisors will continue to struggle with the “really difficult market environment.” Kitces says he worries that advisors are in danger of experiencing what he calls the “three strikes and you’re out” risk, which is the real possibility that “if clients have to go through a third bear market in just over a decade, advisors are going to start losing clients.”
Advisors and their clients “weathered the storm from 2000 to 2002 and then another [bear market] from 2008 to 2009, but there comes a point where clients start to capitulate,” Kitces says. —MW
A person could be forgiven for not immediately connecting Ladenburg Thalmann to the independent space; the firm’s sea change in strategy occurred only a few years ago, after all. Even so, their outsized impact is already being felt.
“We feel very good about our decision in 2007 to focus on the independent broker and advisor spaces,” Richard (Dick) Lampen, president and CEO of Ladenburg Thalmann Financial Services, explains. However, Lampen stresses that the firm is “keeping our foot on the investment side of the business” as well. It’s a boost to business when times are good, he notes, but the firm no longer has to “depend on the vagaries of the capital markets.”
“The greatest potential for growth in financial services is on the independent side,” Lampen adds. —JS
As chairman emeritus of MFS Investment Management, Robert Pozen used his bully pulpit to argue for Social Security reform and the protection of Americans’ retirement assets. Since stepping down from that role, he relies on his reputation in the retirement industry to champion auto-enrollment and criticize target-date funds.
“I’m for automatic enrollment because it gets people into a retirement program, but I’m not in favor of lifestyle funds,” says Pozen in an interview with Investment Advisor after getting tapped for the IA 25 for the second year in a row. “Most people don’t understand them and think that they’re being effectively guaranteed not to lose money in the last 10 years of their life, which is clearly untrue.”
Having spent nearly 20 years serving RIAs at TD Ameritrade, Tom Nally is ready to face what may be his greatest challenge—assuming the role of TD Ameritrade Institutional president that his storied successor, Tom Bradley, left behind in February. He and Bradley worked closely together for years, and Nally has been responsible for trading, fixed income, advisor relations, customer service, technology, account services and operations for more than 4,000 independent RIAs who custody assets with TDAI.
“In working with Tom in this organization for a long time, we definitely have a lot of similarities,” Nally says. “We both place emphasis on the culture here and building strong teams and making sure that we’re always putting the client first.” —JH
Allen Stanford and Jon Corzine
Allen Stanford and Jon Corzine: two names that have come to occupy the same sullied space as Bernie Madoff. While the calamities that both Stanford, (far left), and Corzine, (left), oversaw didn’t reach quite those staggering proportions, their actions have not only forced regulators to police the financial services industry with more zeal, but has lawmakers scrutinizing regulators’ lax oversight of the industry.
Stanford was convicted in early March of running a $7 billion Ponzi scheme. He was found guilty on 13 counts of a 14-count criminal indictment, including fraud, conspiracy and obstructing an SEC investigation. He was found not guilty on one count of wire fraud.
No formal charges have been levied against Corzine, but he’s apologized to congressional committees for MF Global’s failure and for the nearly $1.2 billion in client funds that went missing. “I simply do not know where the money is,” Corzine has told lawmakers. —MW
The date for unveiling a redraft of the Department of Labor’s proposed rule redefining the definition of fiduciary under the Employee Retirement Income Security Act is drawing closer. As it approaches, Phyllis Borzi says DOL will not be granting the brokerage industry’s wish of releasing a rule that mirrors the fiduciary rule being crafted by the Securities and Exchange Commission.
Borzi, assistant secretary of the DOL’s Employee Benefits Security Administration and chief architect of the fiduciary redraft, told Investment Advisor in an exclusive interview in mid-March that while brokerage industry trade groups have been prodding the DOL and SEC to collaborate on their fiduciary rules so that they end up with “one fiduciary standard,” having identical rules just isn’t possible.
The DOL and SEC follow “two separate statutes that are so very different,” Borzi told Investment Advisor. “The securities laws are based on a disclosure model; ERISA is not. Often disclosure is part of what we might require in our prohibited transaction exemptions, but [ERISA] is a flat out prohibition against conflicts of interest,” she says, “in part because Congress viewed retirement assets as special from other kind of savings.”
Said Borzi: “Even if the SEC and DOL collaborated on the same definition of fiduciary, it wouldn’t really get [the brokerage industry] what they want, which is a single set of rules, because even if the same people were defined as fiduciaries, the rules that they would be subject to as fiduciaries in the two different statutory schemes would be so very different.”
However, while the two agencies’ rules “can’t be identical,” she says, “they can be consistent and compatible.” Borzi adds that the SEC’s drafting of a rule to put brokers under a fiduciary mandate and DOL’s fiduciary rule do share a “primary commonality,” which is “to be clearer as to who is a fiduciary under their respective statutes and what [those fiduciaries’] rights and responsibilities are.”
When the EBSA does reissue its proposal, which Borzi has said would come in the first half of this year, it will come in three parts: the regulation itself; the economic analysis (which will include data on individual retirement accounts); and all of EBSA’s prohibited transaction amendments to existing exemptions as well as new amendments.
The set of prohibited transaction exemptions will address 12(b)-1 fees, revenue sharing and principal trading. Borzi said the rule will also address rollovers.
While reluctant to specify an exact date on the reproposal’s release, Borzi says that EBSA is “working and moving forward and are in pretty good shape with our economic analysis,” an area where she says EBSA has been collaborating with SEC economists.
That economic analysis will include data on the costs of applying a fiduciary standard to IRA recommendations, which has been a controversial aspect of the rule. Since EBSA’s attempts to secure data from the industry about the impact on IRA investors of conflicts of interest faced by brokers and advisors who advise on IRAs have failed, Borzi said the department is using “a wide variety of data sources” to compile its cost/benefit analysis on IRAs.
Borzi says she remains “puzzled” as to why the industry trade groups failed to provide EBSA with “data at the individual level on IRAs” to help in the department’s cost/benefit analysis when it was precisely the information those same trade groups told her EBSA would need.
As for those who worry the rule will be skewed in favor of fee-based advice, Borzi pledges that the rule will “not tilt toward one business model.” The rule, she says, “will simply say what we’ve been saying from the beginning: You need to not give conflicted advice.” —Melanie Waddell
Phyllis Borzi photographs taken by David Johnson for Investment Advisor.
Joshua Brown, the bomb thrower behind the blog The Reformed Broker, has always had his eye on the financial services industry.
“In the mid to late ‘90s, everyone was becoming a broker,” he recalls. “It was pretty much the only thing that I wanted to do.” Now Brown is a blogger, an author and a vice president of investments at Fusion Analytics in New York.
“I was blogging before there were blogs,” Brown says of his early days. Every morning, he would clip articles out of newspapers to share with his clients, but as his practice grew, the number of clients—not to mention the “cataclysmic events” of 2008—became too great to keep up that kind of effort, so Brown set up a WordPress account and started blogging.
Advisors were the first to take notice. “They think I was extremely honest and raw at a very difficult time for people who are in the industry,” Brown says. The response has been “overwhelmingly positive,” he adds. “The things that I’m saying are the things that all brokers and advisors think, but would never say out loud. When they see someone like me that’s one of them say it, people freak out.” —DA
Our June 2011 cover story on Envestnet suggested the company stood squarely at the crossroads of the main issues facing advisors today. As the visionary positioning Envestnet at those crossroads, Jud Bergman is highly qualified to be a member of the 2012 IA 25.
Since then, Bergman and Envestnet have not been complacent. Over the past six months the Chicago-based company has acquired or announced the acquisitions of FundQuest, Tamarac and Prima Capital. In its 2011 Q4 earnings, the company reported a 33% increase in revenue from AUM. That’s much greater growth than mere market appreciation, and suggests that Envestnet is broadening its revenue base well beyond its roots.
Envestnet’s strategic growth hasn’t happened by chance. Adding FundQuest, Tamarac and Prima to the fold were not AUM plays or ways to remove competitors from the field: They were, and likely will be, accretive in the broadest sense. However, in addition to financially accretive acquisitions are ones that Bergman calls “value accretive,” in which acquisitions include technology or products that can enhance Envestnet’s existing platform. —JG
Jud Bergman photographs taken by Tom McKenzie for Investment Advisor.
The IA 25 is decided each year by the editors of Investment Advisor, and most of the candidates are championed by editors who descry the influence of said candidate from their own perspective. But others are determined by popular acclaim; Julie Littlechild, president and founder of Advisor Impact, is such a member of the 2012 IA 25. Nobody understands better how advisors interact with clients than does Julie Littlechild.
What Littlechild does in her dispassionate researcher’s way is to point out that advisors may not actually know their clients as well as they think; that there are, as she says, “perception gaps” between advisors and their clients.
Beyond discerning those gaps, Littlechild is at least as interested in finding out how to close them. What are the drivers of client engagement, she wonders, and by asking the right questions, she can find the answers. By improving client engagement, you’ll not only retain that client and get referrals, but you’ll be on the path to honing a client list that matches your skills and values.
Julie Littlechild’s research is helping to push the practice of financial planning squarely into its future as a profession. —JG
Depending on who you talk to, Mario Draghi is either a demon or the savior of Europe.
What seems clear, however, is that Draghi’s leadership at the European Central Bank has averted a much more serious disaster on the Continent. Yes, he did it by printing more euros, but can you say “quantitative easing?”
Draghi is an economist and former head of the Italian central bank, but he is also much respected as chairman of the Financial Stability Board.
The ECB improved liquidity by pushing out about 1 trillion euros-worth of three-year loans as part of its Long-Term Refinancing Operations (LTROs), which helped stabilize European banks by allowing them to refinance their debt with cheaper cash. Some of the now stronger European banks have signaled they may repay those ECB loans early, yet another healthy sign of stabilization.
The LTRO scheme showed Draghi’s ingenuity and diplomatic expertise, both of which will be necessary as Europe drifts into what now looks like a mild recession followed by recovery, but with a stronger banking sector. That’s good for Europe and good for us here in the United States. —JG
Mark Tibergien has been on the IA 25 every year since the list has been published, and his insight and passion hasn’t abated over those years. He’s as influential as ever in both his leadership at Pershing and in urging advisors to run their practices like businesses.
In addition to Pershing Advisor Solutions’ growth among high-end RIAs in the United States, PAS is now a growing presence in the U.K., where changing regulation is helping to create an environment in which independent advisors can thrive.
But perhaps the greatest and most appropriate testament to Tibergien’s influence is his impact on the people who work with him now and those who used to work with him.
At Pershing, if you speak to any of the executives who run customer service or practice management or technology, at some point they’ll mention Tibergien as the practical visionary behind their striving for success. He likes to say that “culture is what people do when the boss isn’t around,” and at Pershing those people have internalized the vision, embraced the measurement and are living the culture. That’s the definition of influence. —JG
Not familiar with Mr. Xi? You will be, for this fall, at the 18th National Congress of the Communist Party of China, Xi Jinping is likely to become the new leader of the country with the second largest economy in the world.
While predicting changes in the Chinese leadership can be difficult, we know that the new leadership will be steering a ship of state that has unprecedented economic might and growing military strength.
So who is this man who will be overseeing this economic giant? Xi, 58, is the son of one of Mao’s most trusted guerrilla leaders who later was ousted from power. Xi himself was re-educated as a teenager during the Cultural Revolution and later studied both chemical engineering and law. Mostly, though, Xi is a politician with experience running all different levels of government in China, and as the “first among equals” of the nine-member Politburo, his political skills will be put to the test.
By all measures a cautious man, it’s likely he will be a pragmatic leader who nevertheless will be tested by China’s many internal and external challenges. —JG
Dr. Kent Smetters
A good argument could be made for excluding Wharton professor Kent Smetters from the IA 25. He’s responsible for an online service called Veritat Advisors that provides goal-based financial planning to middle-class clients, something that would seem to spell doom for the advisory business.
Veritat offers advice for $40 a month per family after a $250 initial planning fee, and clients themselves input the data while the website creates and manages the plan. But Smetters says advisors are essential to his startup, and he means to help them get more face time with clients.
“A lot of websites have tried to get rid of the advisor, and we know that doesn’t work,” says the 44-year-old Ph.D. in economics from Harvard University. “Money is a very emotional issue, and that’s where you need the human touch.”
Veritat’s RIA had less than 100 advisors as of early spring, but it keeps bringing on more advisors and targets adding several dozen a month.
“There’s a huge blue ocean out there right now in terms of the middle class,” Smetters says. “Veritat is honest, it’s affordable, it’s comprehensive, and it also empowers advisors.” —JH
“We are absolutely committed to redefining what open architecture means,” Larry Roth explains in his no-nonsense style. “We’ve trademarked ‘All Ways Open Architecture’ and have built a platform that lets advisors grow their businesses in the way that suits them best.”
Once written off as just another victim of Wall Street headline risk, the CEO of Advisor Group proved detractors wrong, steering the three BDs for which he’s responsible through arguably the toughest business cycle in our nation’s history—and that’s no hyperbole.
Roth is taking a leadership position not only at his own firm, but in the industry as a whole through his involvement with FSI, where he is the advocacy organization’s vice chair in 2012. He wants a seat at the table during the rebuild, an indication that he’s focused squarely on the future of the advisor business.
Echoing the enthusiasm he shared with us late last year (see “Retirement Reset,” IA, December 2011), Roth concludes, “This is a great time for advisors. I haven’t been this excited since 2007. We want advisors to focus on their businesses and focus on their clients and leave the headaches to us.” —JS
Larry Roth photographs taken by David Johnson for Investment Advisor.