The board of directors of The Investment Management Consultants Association (IMCA) sat with AdvisorOne at IMCA’s annual conference in National Harbor, Md. last week for a discussion of the organization’s response to the needs of its members in the current market and regulatory environments.
“We’re moving forward as an organization, but we’re moving forward under change,” said Betsy Piper-Bach, IMCA’s chairwoman as well as vice president and COO for NADA Retirement Administrators.
“This change will require changing skills and knowledge on the part of the advisor,” added Sean Walters, IMCA’s executive director and CEO.
In addition to Piper-Bach and Walters, other board members in attendance included John Moninger, executive vice president of advisory and brokerage consulting services for LPL Financial; Tony Davidow, managing director and portfolio strategist for Guggenheim Investments; Mike Dieschbourg, managing director at Broadmark Asset Management; Stewart Koesten, president of KHC Wealth Management, and Kevin Sanchez, senior institutional consultant with UBS Institutional Consulting.
“The CIMA designation was our core offering as an organization,” Piper-Bach said. “But CIMA wasn’t accounting for estate planning, tax planning and other needs that would take the advisor to that next level, so we developed the CPWA. Now, we need even more than that to continue gaining the needed expertise.”
Koesten noted that when it came to IMCA’s designations and certificates, advisors might spend a bit more, but they have specialized tools to use immediately in their practice.
“The new certificate or designation [to which Piper-Bach referred] is one that will have to be sold because there are some people who are hungry for it, and there are some that need to be hungry for it,” he said.
Sanchez added that advisors can leave the conference, go back to their offices on a Tuesday afternoon and immediately use what they’ve learned.
“It’s not theoretical; we demand that our speakers make their presentations actionable,” Sanchez said.
“We all remember a small community of institutional consultants at wirehouse,” Davidow responded. “Now, RIAs are a core growth strategy for IMCA. We have 8,650 members today, and the track structure we offer at conferences is important because advisor practices are so diverse. We’ve grown as an organization because our constituents have grown, but also because what they are dealing with has grown.”
Attendees are advice providers, and continually want to provide better advice for investors, Moninger added, noting, “They want to know about client issues and how to deal with them, transfer of wealth issues, tax issues and so on. They want to know the most effective way to communicate with clients because it’s more about dealing with emotions. Good advice will rely on good partnerships with accountants and lawyers, and it will also be about the particular medium, whether it is web seminars, conference calls or something else.”
“Markets are more complex, driven by the wired world we live in,” Dieschbourg began. “This complexity of the markets has made us as an organization think about what we deliver and how we deliver information. For instance, there is a changing definition of risk moving from standard deviation to now viewing risk as the potential loss of capital. We need to provide advisors with tools to make our clients stay in the market and make the complex simple.”
Walters (above) compared the situation to general practitioners in medicine, where the advisory field has now gotten “too complicated and advisors need more skills in order to handle it.”
“As a result, teams have evolved and are still evolving,” Davidow said.
Sanchez says he roams the conference floor to converse with attendees, asking them why they’re there; why they’re taking the time and expense away from their practices.
“They say they’re here because it makes them an ‘A’ student,” he said. “Economics in the 1980s meant it was easy to build a business and have a great growth rate. We looked at 15% returns as if it was a birthright. We have to solve problems that are apples to lug-nuts for clients. And I have to tell them that I can handle six of seven things in an expert manner where years ago that was never a need.”
“I’m worried more people aren’t [coming to IMCA conferences and getting the necessary expertise],” Koesten added.
The conversation then focused on the organizations growth aspiration's, and how to drive membership.
“We ask ourselves, ‘How do we get more people under our tent?’” said Davidow, who’s served on IMCA’s board since 2009. “Part of the reason this organization is so effective, I felt, is that many of the best financial practitioners have outgrown the wirehouse model.”
“Knowledge provides solutions,” Dieschbourg said. “As issues get more complex, solutions become more complex. We’re fortunate that we have leadership, staff and a board at this organization that are embracing this evolution, rather than sitting back on their [haunches].”
The recent addition of a government relations board has been a topic of discussion among IMCA members, something Piper-Bach was particularly keen to address.
“Part of the reason we instituted the government relations board is that the industry knows us, but clients and regulators do not,” she said. “We’ll go to regulators and tell them who we are, but it’s more about education than advocacy because we don’t want to lobby. It’s a new target and we feel they should know who we are.”
“But it’s a two-way street. Folks in D.C. don’t understand how the advisor’s practice differs from other models. With sweeping change, will they understand our members and will our members understand new regulations?”
The discussion concluded with two hot topics for advisors: alternative investments and succession planning.
From a product and strategy standpoint, advisors have to consider annuities and alternatives, as well as traditional products, which puts a lot of stress on them,” Moninger said.
“A lot of time is spent on the education of what alternatives really are,” Davidow added. “Clients like the idea of using them to dampen volatility, but they’re afraid of encountering another Madoff.”
“Do you bring generations of clients together?” Piper-Bach queried.
Koesten noted that the second and third generation doesn’t want the advisor of the first generation. For that reason, he said, his firm has advisors of varying ages that can be matched with clients of a similar age.
“Wirehouses never let us talk about practice succession, but they now realize they’ll lose the assets,” Dieschbourg concluded. “As for the support we give to younger advisors, we provide an opportunity for knowledge and networking. Their success depends on the effort they put forth. It’s a safe advisor environment and they can talk to other advisors rather than just try something and lose client money. You can have a young advisor ask the dumb question to a smart person.”