Groucho Marx once famously proclaimed that he wouldn’t care to join any club that would include him as a member. So what are we to make of a grouping that includes folks as diverse as George W. Bush and Bob Veres, Chuck Schwab and Andy Gluck, Alan Greenspan and Sheryl Garrett? Well, that would be the exclusive IA 25, our magazine’s annual naming of the 25 most influential people in and around the financial planning profession. It’s a club whose diversity reflects the broad range of pastimes and passions and partnerships that is the financial planning and investment advisory universe in the year 2005.
While nearly all the members of the group have already had a notable impact on the way advisors ply their trade, the IA 25–which appears in alphabetical order, not relative importance–is by design a forward-looking statement. Thus it is the editors’ judgment that Bob Thomas, the chairman of the House Ways and Means Committee, may loom larger in your thoughts and in your clients’ pocketbooks in the days ahead than you might have first thought, as President Bush’s stated intent to remake Social Security, simplify the tax code, and make permanent his first-term tax cuts play out on Capitol Hill. In the last year of his tenure as the second-most-powerful person on the planet (or is he first?), Alan Greenspan’s guidance of the Federal Reserve in its steady march of interest-rate hikes may affect your investment advice and asset allocation. There’s more going on in the capital than legislation and open market committee meetings: the major planner trade groups have clearly decided to march on Washington, too, and are asking planners to put their PAC money where their hearts are.
Charles Schwab has blazed a history of innovation with his eponymous company, but having retaken the CEO reins last year and promising to stay on until January 2007, his stated intent to refocus Charles Schwab & Co. on end investors and the advisors who serve them will affect more than a few advisors. Schwab is not alone in tieing his fortunes to you, the trusted advisor. The leaders of companies as big as Fidelity Brokerage, as respected as Commonwealth, Raymond James, and LPL, and as up-and-coming as National Financial Partners have all hitched their profit wagons to the advisor’s assets. Among planners who know the value of advice, the consultants to and consciences of the profession–folks like Mark Tibergien, Don Trone, Chip Roame, our own Bob Clark, and the aforementioned pony-tailers Veres and Gluck–continue to tilt at windmills and provide the business metrics that are turning a profession into a business.
Finally, this club of 25 includes four planners who are handling the vexing challenges of a profession with insight, grace, and bold action. As I’m sure the members would agree, this club stands on the shoulders of the giants who led the profession to its healthy current state, and will walk into the future along with the thousands of women and men who try to run their practices like businesses, while following ethical guidelines that ensure the client will always prosper first.–James J. Green
Currently serving a one-year term as president of the Financial Planning Association, Jim Barnash, a 51-year-old CFP from Chicago, sees his most important function as making sure he “keeps the bus on the road” and continues the work of his predecessors in carrying out the FPA’s mission of advancing the profession. “I think at this point we could say the profession is in its adolescence,” he says. “Now we have to build up the industry.”
One of his goals as FPA president is to help the association operate more professionally and efficiently. “I come from more of a corporate background than some previous presidents,” he explains, adding that his experiences in a large firm can help him bring a new perspective that can be helpful for FPA in building its internal systems.
Barnash also has a day job: he is managing director for the Chicago Regional Planning Group of Lincoln Financial Advisors Corp.–Robert F. Keane
Stephen A. “Tony” Batman isn’t the Caped Crusader, but he is somewhat of a superhero in the dimension of broker/dealers. The 49-year-old Dallas resident can list a string of alphabetic credentials after his name, including CFP, CPA, and CEO. The last refers to his position as chairman and co-founder of 1st Global Inc. The reason he made the IA 25 is the missionary zeal he’s brought to his two terms as chairman of the Financial Services Institute, the trade group for independent broker/dealers.
“What FSI wants is a fair and balanced playing field that more than adequately protects consumers against predatory practitioners and unethical firms, while allowing the vast majority of us who show up with integrity every day to do good things for clients,” he enthuses. “We also want more teeth to purge the bad people out of this industry.”
To realize those goals, Batman has spearheaded a multipronged effort to get FSI members more involved with NASD governance and in the commentary and vetting processes for rule and regulation proposals. He’s also worked with the FSI to build individual membership within the B/D community. “Those financial commitments are fuel for the rocket,” he says, noting how expensive advocacy can be in America.–Robert F. Keane
Any list of the big issues that challenge advisors today would have to include dealing with competitive pressures, giving clients access to a wide range of products and services, gaining operating efficiency to improve profit margins, and finding a way to retain your value to clients while cashing in on the years of sweat equity needed to build your practice. Jessica Bibliowicz’s National Financial Partners competently sits astride all those issues, and over the past six years has gathered unto itself 150 acquired companies and almost 200 affiliated firms, all while successfully going public.
As chairman, president, and CEO, Bibliowicz, 45, says National Financial has “balanced independence with scale” for its acquired and affiliated firms, which she describes as companies that are already successful and want to continue to grow. While NFP encourages clear succession planning in its acquired firms, its model is not for those who want a quick exit: owners receive cash and NFP stock upon selling, but they also sign a management contract that makes it worth their while to continue to grow the company. So far, most of the acquired firms are insurance practices; RIAs constitute 13% of the business. One sign of NFP’s growth: this spring, it signed a deal to acquire Highland Capital, a company that had followed a similar strategy to NFP, and had acquired some 21 brokerage general agent offices.–James J. Green
George W. Bush
Support for President George Bush’s plan to revamp Social Security using private accounts is, to put it mildly, waning. Republican Congressmen who took to the road with the president earlier this year to tout private accounts were confronted with a public that wasn’t buying the idea. Chip Roame, president of Tiburon Strategic Advisors, says Bush deserves kudos for bringing an issue like Social Security “to the forefront.” Bill DeReuter, assistant director of government relations at the FPA, says Bush’s biggest challenges now are fixing Social Security and Medicare. Bush, 57, “could then bring up personal accounts as part of, or outside of, Social Security.” Moreover, Bush is moving ahead with his plans to explore tax code reform and make permanent those tax cuts that he pushed through in his first term.–Melanie Waddell
There’s no shortage of industry observers who are happy to supply their opinions on financial planning. There are also plenty of data gatherers who focus on the profession. But there’s only one Bob Clark, who combines a passion for the promise of planning with access to a trove of hard information on the industry and with the healthy skepticism honed by decades of covering the profession for Investment Advisor and other publications. Clark, 50, believes “the real job of a financial planner is to protect clients from the financial services industry,” and “to see through the marketing hype.” Planners must decide whether they are “part of the distribution network, or are on the client’s side.” He is optimistic about the future, saying “we’re getting close to a financial planning profession,” but warns that the nascent profession is also at risk from Washington, whose denizens may “initiate some massive regulation of advisors that could change everything.”–James J. Green
If you are a broker/dealer rep, Joe Deitch, 54, has some bad news and some good news. The bad news, says Deitch, CEO of Commonwealth Financial Network, is that the industry is seeing “enormous downward pressure on fees and commissions, coupled with increased regulatory requirements.” The good news is that the B/D business is adapting by moving from a product focus to a wealth management model, coupled with technology to make advisors more efficient and effective.
That approach seems to be working for Commonwealth. By focusing on higher-end advisors and “throwing all our energy into providing them with technology,” Commonwealth has grown to $30 billion in assets and 980 reps.
Deitch is now making a “major push” to host technology such as e-mail, CRM, and back-office applications so that advisors will be able to spend more time working with clients.–William Glasgall
When future observers recall Bill Donaldson’s legacy as chairman of the Securities & Exchange Commission, they will utter two words: regulation and compliance. While most advisors and industry officials agree the scads of SEC regulations over the past two years have been onerous, they stop short at saying Donaldson, 73, is doing a bad job. “I think Donaldson has been a very good chairman at a very challenging time,” says David Tittsworth, executive director of the Investment Counsel Association of America. Tittsworth says it was Donaldson’s “swift and aggressive” moves in reining in shady practices at mutual fund firms that stopped Congress from issuing sweeping reform legislation for funds and advisors. The regulatory environment could “have been a whole lot worse . . . if Donaldson hadn’t stepped up to the plate,” he says. Michael Tannenbaum, with the law firm Tannenbaum Helpern Syracuse & Hirschtritt in New York, hopes the SEC will have the resources to follow through on registering hedge fund managers. But Donaldson may not be at the helm too much longer: Insiders speculate he may leave the Commission by the end of 2005.–Melanie Waddell
Sheryl Garrett knew something was amiss when the minimum annual amount that she and her partner were charging clients in their fee-only planning and asset management practice climbed from $2,500 to $4,000 to $7,500. “That pulled at my heartstrings,” she recalls, noting that the high fees were pricing her services out of the reach of middle-class consumers. “I strongly believe that everybody should have access to competent financial advice,” she says. “Most folks can’t afford a full-time financial planner, but have questions about money all the time.”
Garrett’s answer to this quandary was to launch a new practice model in Overland Park, Kansas, in 1998. Instead of offering planning and asset management, it featured only one service, financial planning, which clients pay for by the hour.
The new practice begat the Garrett Planning Network, which licenses her system to advisors with the same mindset. Planners, who must be RIAs, pay $7,500 to join and $1,200 to continue their affiliation. With her network expanding to 245 members, up from 200 in 2004, and her other career as author, speaker, and expert witness occupying more and more of her time, Garrett, 42, gave up serving clients herself this year.–William Glasgall
Andy Gluck sits at an interesting junction of the profession. As a journalist who has spent years sharing his reporting with Investment Advisor readers, Gluck analyzes the technology tools that advisors use to stay efficient and competitive. But Gluck, 49, wears another hat: he’s the president of Advisor Products, a company he founded that supplies technology, compliance, and marketing solutions to independent advisors. He’s a bit uncomfortable with his transition “from being a reporter to a vendor,” but it serves his readers well. In trying to meet the needs of his clients, he knows the challenges that his independent advisor readers face, and he understands what it means to be an entrepreneur competing against deeper-pocketed companies. Gluck sees a mixed future for advisors. “Everybody [custodians and broker/dealers] wants to build platforms” that include portfolio management, CRM, and financial planning applications, but he worries over what these integrated, near-proprietary platforms will do to advisors’ independence. He suspects that B/Ds “will segment according to the level of control they have over their reps.”–James J. Green
Alan Greenspan affects all matters financial. With his term as chairman of the Federal Reserve Board set to expire in January 2006, will he be reappointed? The likely answer is no. After 17 years at the Fed, industry watchers say Greenspan, 79, is ready to pack it in. Greenspan has been a steadfast supporter of President Bush’s plan to privatize Social Security, prodding Congress to act fast in fixing the ailing federal system as well as Medicare. Greenspan “has a big following across party lines, and he is truly on the side that [Bush's private accounts] are a good idea,” says Chip Roame, president of Tiburon Strategic Advisors. But with his term ending soon, “his impact may lessen.” Indeed, it was Greenspan who suggested that the Administration fix Social Security by indexing Social Security based on the consumer price index (CPI), instead of on changes in wage rates.–Melanie Waddell
“When you’re managing $450 billion,” Bill Gross confesses, “it’s tough to outperform the market by one percentage point.” Yet Gross, who has steered PIMCO through the bond market’s often bumpy road for 34 years, says that in 2005 he is “right on track for another 100-basis-point year.” Given his past performance, Gross isn’t bluffing: Standard & Poor’s figures that his Total Return bond fund has bested its peers by an impressive 158 basis points annually, on average, over the past five years.
Gross, 61, has built a following among advisors not only due to his record, but also because he knows where they come from. Gross started PIMCO as an institutional asset manager in 1971 and continues to connect with advisors three or four times a year at conferences he holds at his California headquarters.–William Glasgall
“I have two different businesses,” says Scott Hanson, 38, founding principal of Hanson McClain, Inc., the Hanson McClain Retirement Network, and Liberty Reverse Mortgage in Sacramento, California. “We work in the retail area doing financial planning and investments for individual clients, and we have a consulting business where we help other advisors grow their practices.”
The advisory portion of the business consists of Hanson, partner Pat McLain, seven other CFPs, and more than 20 support staff, including a four-person marketing department to serve about 3,000 clients and their collective $900 million in assets. “We’re all on salary,” Hanson explains. “No one has a bonus plan based on individual fee production. We’re all after the same goal, serving our clients and increasing our business.”
“There are a lot of wonderful financial planners and investment advisors, but a lot are terrible marketers,” Hanson says. “I think the business is going to undergo continued consolidation and specialization,” he observes. “The independent advisor who is not focusing on specializing is going to have a hard time competing.”–Robert F. Keane