More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
When Joe Duran mentions “big ideas,” he means it, something he implored attendees of MarketCounsel’s Member Summit 2012 to leave with and implement in their own practices.
The CEO of United Capital Financial Advisers said he and his firm have a relatively simple job, which he said “is to improve the world in which we live in.”
“I’m not that smart, but I’ve been fortunate to be out in front of a number of waves in which I’ve been able to capitalize,” Duran (left) began. “The first wave was commission to fee. The second wave, which is occurring now, is the shift from investment management to successful life planning; where we view our clients not as walking wallets, but as living, breathing human beings.”
His presentation, titled “The Consumer Revolution,” sought to explain the difference between evolution and revolution.
“During Abraham Lincoln’s lifetime, the world ‘shrank’ by a factor of 24,” he said. “Meaning the distance traveled in a day at the beginning of his life could be traveled in an hour by the end of his life.”
We’re experiencing this type of a revolution in technology today, he argued, and then some.
“When something like this happens, we can’t think about how we can simply be a little better. We have to be radically better and that involves change. In a revolution, a business must change and adapt, or it will die.”
Examples he gave were buying music on CDs form a store, where “two of the songs would be good and the rest would be awful, but we bought the entire CD. We would never go back to that. Or the travel agent; after Expedia, I’ll never again do business with my very nice, very helpful, but more expensive travel agent. We won’t ever pay late fees again at a video store.”
Apple killed the music store, he noted, and Expedia killed the travel agent business. One thing companies like these have in common is “a democratization of knowledge and complete transparency, something our industry has been secretive about, especially when it comes to what we charge, but no longer.”
Companies like Apple and Expedia were the first to recognize the importance of this openness and take it to the marketplace, one reason they’re so successful.
“The website Betterment.com will give someone with a $100,000 account an ETF wrap, for which they’ll provide rebalancing and they’ll send statements,” Duran warned. “They’ll do it all for 10 basis points.”
Employing another mass market example to make his point, he related that when Starbucks first started, competitors weren’t concerned, noting the quality of their coffee and their lower prices. The problem with the thinking is that Starbucks wasn’t selling coffee; they were selling the experience.
“How well you sell the experience determines what you charge, especially in commoditized businesses,” Duran concluded.” If there is one thing you take away from this session, it’s to determine what business you are in. If you’re in the investment management business and rebalancing client accounts, someone else will do that for 10 basis points.”