After the Flood

Compare this to the treatment that wirehouse brokers, as employees of their firms, receive in a crisis such as this one. Yes, they have offices all over the South to move into, temporarily at first, but also longer term if necessary. Yes, they are provided computers, telephones, administrative support, and, of course, access to the same client files they had in their original offices. In fact, the disaster response program is so strong at some of these firms it’s as if their displaced brokers merely moved to a second office. Most important, however, these firms are committed to rebuilding the books of their brokers through referrals, clients from retiring brokers, marketing, whatever it takes, because it’s their business.

Independent B/Ds’ Limitations

On our side of the fence, independent B/Ds aren’t likely to provide this level of support to rebuild traumatized practices. For one thing, they can’t afford it: with no proprietary products and 90% payouts and up, even the most successful financial planning B/Ds run on very narrow margins. With few exceptions they don’t have the deep pockets required to invest in rebuilding the businesses of their independent reps.

What’s more, they’re not set up to provide the information and support necessary to reestablish a financial planning practice. Unlike their wirehouse counterparts, independent B/Ds (or custodians) didn’t have much of a hand in helping independent advisors build their practices–that’s one of the things that makes them independent. In return for this lower level of support, independent advisors get a much higher level of payout, as much as 100%, in addition to an even more highly valued autonomy in servicing their clients.

They also get home offices that are neither staffed for nor with the expertise or resources to provide much help in building or rebuilding practices, particularly in times like these. Consequently, to get the knowledge and find the resources to build independent practices, financial planners have largely turned to each other, sharing information, experiences, vendors, and sometimes even clients in local association chapters, at national gatherings, in self-created study groups, and often these days over the Internet. It’s just this collegial rather than competitive atmosphere among financial planners that has long baffled industry observers, especially those coming from different industries such as Mark Hurley, and many others.

More like other professionals such as doctors and lawyers, rather than other players in the financial services industry, financial planners have historically turned to each other for support and guidance. So it’s no surprise that in a time of unprecedented disaster, affected planners would turn to their traditional support group: other planners. Unfortunately, since the profession has never faced a crisis of this magnitude before, it didn’t have the programs and procedures in place to respond effectively. As with governments at all levels around the country, one might have thought 9/11 would have served as a wakeup call to consider such a response, but that clearly hasn’t been the case.

The FPA Rises to the Challenge

Fortunately, the financial planning community is stepping up. The Financial Planning Association has taken the lead in relief efforts, as you might expect from the dominant membership organization, by creating the Hurricane Relief Center for Planners on its Web site at www.fpanet.org. In fact, having the ability to respond to situations like this is one of the reasons it’s important to have a dominant organization.

To respond effectively to this crisis, the planning community needs a single clearinghouse for information, resources, and volunteer efforts to help affected financial planners and their clients. The HRCP is such a place. Open to all financial planners who need help or those who want to help them, the HRCP will enable all financial planning groups, the vendors who serve them, and their broker/dealers and custodians to pool their resources to create a powerful disaster response tool, without recreating the wheel or stretching beyond their means. Headed by the FPA’s Laura Garrison, and staffed largely by volunteers, the HRCP will bring together volunteers with planners who need help, and find resources to solve the problems faced by displaced advisors, including financial aid.

Of course, the key to any effective response is to quickly and continuously identify the real needs of those who need help. This is particularly essential in a situation such as this: one that the industry has never faced before, and on an unimaginable scale. There are no experts here; everyone is virtually flying blind. As with Bob Reed, those needs can, and probably will, prove surprising. But the FPA, NAPFA, and other organizations and companies are already committed to working together to listen to whatever needs planners have and finding the resources to respond effectively. With a community-wide response, we may just witness yet another demonstration that independent advice is truly more powerful than the alternative.

Bob Clark, a former editor-in-chief of this magazine, sagely surveys the advisory landscape from his home in Santa Fe, New Mexico. He can be reached at [email protected].