When trying to get a handle on a profession as diverse and unwieldy as the investment advisor/financial planner universe, it’s hard to find commonalities. There are advisors and planners and consultants, not to mention those qualifiers: “investment advisors,” “financial advisors,” “life planners,” and “financial consultants.” Its practitioners are compensated in various ways, use a range of partners to run their practices and provide services to clients, are regulated by different entities on the state and national level, and face competition from all over. We know that this business of providing independent, unbiased advice to individuals has been around for 35 years or so, and that like any new business it has gone through stages. It’s also true that this profession continues to evolve, and that we may be witnessing the next mutation even as we speak, as planners and advisors figure out the riddle of providing financial advice and other services to an aging population that expects a high level of service and demands they be treated as individuals with unique characteristics and goals. There are also millions of other people who are younger (and older) than the boomers who will have different needs and face an even more uncertain future.
Ron Roge has been there for much of the profession’s history, and he stands now comfortable and yet still evolving at the cusp of the next transformation. That’s why this year’s edition of the IA 25, the 25 most influential people in and around the profession, highlights Mr. Roge as emblematic of the profession’s journey and a model for how to transform a practice for the future.
Some know Roge as being famous for something he helped accomplish years ago at NAPFA: Establishing the term “fee only” firmly in the minds of the trade and consumer press. Roge , 59, has not been resting on his laurels, however, and an assessment of his thriving practice–R.W. Roge & Company Inc. in Bohemia, New York–and his approach to serving clients–embodied in the self-written piece that follows this story (see page 58)–encapsulates not only what an advisory firm needs to do to succeed now, but also lays out the structure and the process for succeeding in any environment. His practice, which “will never stop evolving,” he pledges, is going where nearly all advisory firms will need to go in the years ahead, focusing on compliance, due diligence of investments, and an aging clientele that will come to you, and stay, if you provide them with services that are not, strictly speaking, financial. When asked if he’s suggesting that what wealth managers do is provide clients with a broader range of services that goes beyond money management, Roge 1/2 agrees, but demurs that’s he not responsible for the insight. “Credit for that goes to Rosanne Grande, one of the CFPs here at our firm. We’d be reviewing client situations and Rosanne was the first one to recognize that ‘My God, these people are retiring and they’re still responsible for their parents who are still alive. That wasn’t factored into their planning 20 or 30 years ago.’”
There’s a side benefit to providing such services: “You get grandma in a nursing home, and you’ve got a client for life. You’ve taken a tremendous amount of stress off the family.” Roge 1/2 takes great care to show the same respect for his 10 employees–”We’re nothing without them”–as he does for clients. While his suggested minimum account is $1.2 million, he can accommodate younger, less flush clients as well. As for his clients, these days Roge 1/2 regularly projects out life expectancy to 100 in his plans, and expects those clients to be active during retirement, another challenge for advisors. “People don’t want to rust out,” he says, “they want to wear out.”–James J. Green
It was an uncertain world for advisors when Richard G. Averitt III earned his CFP in 1979. Now, as chairman and CEO of Raymond James Financial Services, Averitt says the greatest challenge for advisors is that while “navigating an appropriately increased regulatory presence and requirements,” they have to build a successful business in a time of falling margins. That environment “requires that they achieve efficiency and effectiveness, without losing the ability to show their clients the kind of personal attention that makes the business most successful.”
If Averitt, 61, could choose one thing to tell advisors, this is it: “There is absolutely no substitute for integrity–integrity is what you do when nobody is looking, and yet it comes through your pores. That’s a character thing, not necessarily a learned thing; temptation exists in all our lives. And yet the integrity of our advisors has to be unassailable, just as the firm’s does.”
In addition to “staying married for 39 years, and raising three absolutely wonderful children,” Averitt notes he is most proud to be able to “provide a strong, consistent leadership to our advisors.”–Kathleen M. McBride
“I’m just a farm kid from Kansas living the American dream,” says Stephen “Tony” Batman. The 50-year-old Dallas resident is chairman, president, and CEO of the broker/dealer 1st Global Inc. Filling those roles would be more than enough to keep most individuals busy. But that’s just his day job. After two years as chairman of the Financial Services Institute, Batman continues to serve on the B/D group’s executive committee.
Batman thinks that the biggest challenges for the advisory community are presented by the new rules and regulations enacted within the last four years that have had a series of unintended consequences. “They have piled on so much regulation that advisors can no longer serve average Americans,” says Batman. “That’s been a huge consequence and a hidden tax of regulation, at a time when Americans need to start taking care of their own retirement.”
Batman also notes that another unintended consequence of the regulations is to force advisors to move to “more of an RIA fiduciary model because the NASD has in essence deemed that registered reps of a broker/dealer are per se fiduciaries.”–Robert F. Keane
When Ben Bernanke replaced Alan Greenspan as the new chairman of the Federal Reserve Board on February 1, he had some big shoes to fill.
After only a few months on the job, how has Bernanke, 52, done? The consensus is that he’s doing quite well. “The good news is that the market has accepted him,” says Mark Balasa of Balasa Dinverno & Foltz in Schaumberg, Illinois. Bernanke is “going to be more transparent and informative than Greenspan, which I think the markets and investors like,” he says.
Gail Dudack of Dudack Research Group in New York says she’s most impressed with Bernanke’s first testimony to Congress as well as his public presentations. “I think he’s being very direct,” she says. Dudack expects Bernanke to stay in lockstep with Greenspan’s policies, she says. That includes raising interest rates. Bob Doll, president and CIO at Merrill Lynch, argued recently that Bernanke will raise rates again in May, but “that may well be the last increase of the current cycle.”
While Bernanke does make “statements that are clear, he’ll throw in something at the end to make it less than perfectly clear,” says Dudack. “That is the role of the Fed chairman.4 The chairman should never be 100% predictable.”–Melanie Waddell
When National Financial Partners was founded in 1998, its business model was greeted with a certain degree of skepticism. Acquiring firms in the life insurance and estate planning; corporate and executive benefits; and financial planning and investment advisory businesses isn’t really that difficult if you have enough money to spend, was the conventional wisdom. But taking well over 100 individual entities and helping them to grow within a new and supportive corporate culture while at the same time maintaining the entrepreneurial spirit that made each of them successful in the first place is quite another task.
Yet it’s a task at which NFP’s chairman, president, and CEO, Jessica Bibliowicz, 45, seems to be thriving.
Like most successful entrepreneurs, Bibliowicz is well aware that NFP’s accomplishments are not hers alone. She points to the management team she’s assembled as her greatest professional accomplishment, “but I always give the most credit to the firms that we’ve acquired or affiliated with. I think our ability to find these great companies and help them foster their continued growth is what makes NFP so special.”–Robert F. Keane
House Majority Leader John Boehner is at the forefront of addressing two crucial issues: taxes and retirement savings. The former chairman of the House Education and the Workforce Committee, who became majority leader on February 2, said in early April that lawmakers are close to finalizing a $70 million tax-cut package that would extend tax breaks on capital gains and dividends. The Ohio Republican, 56, is also one of the lead negotiators working to craft a compromise bill on pension reform.
That bill was originally expected to be completed by mid-April, but that date has been pushed back. The House version of that bill includes Boehner’s provision allowing advisors to give investment advice to 401(k) plan participants. The tax-cut package would extend the maximum 15% tax rate on capital gains and dividends beyond 2008, and would provide some relief on the Alternative Minimum Tax.
Boehner hails from a working-class family, and is one of 12 children. “Boehner has a number of qualities that will serve him well” as majority leader, says Scott Talbott of The Financial Services Roundtable in Washington, D.C. “He is a unifier and works on a bipartisan basis.” Another great quality: “He has an ability to grasp an issue quickly, and then put it in plain English so people can understand it.”–Melanie Waddell
As it turns out, knowledge really is power.
In the five years since founding CEG Worldwide, John Bowen and his team have surveyed 16,000 advisors in the U.S., U.K., Australia, and Canada so as to equip the firm’s advisor clients with the information they need to start profitable practices. “Everyone is always talking about helping clients get to the next level,” Bowen, 50, says. “At CEG, we focus on clients breaking through and skipping over a few levels to get to success faster.”
The CEG training program provides advisors with their own coach for a year plus access to all of CEG’s research. The cost is $19,500. “We identify seven strategies and 30 tactics of top advisors,” Bowen says.
Bowen says that one of the biggest mistakes advisors make is taking on too many clients.
“The average advisor making $75,000 a year has 201 clients. [An advisor making] $150,000-plus has 172 clients. But when you get to an advisor making more than $1 million, the number drops to 43 clients. This is where empirical data helps. We provide the framework so you can be successful on purpose.”–Ryan G. Murphy
For Tom Bradley, one of the most exciting things about the TD Ameritrade merger is the additional resources it makes available to accelerate the growth of the company’s advisor business. Also, “We intend to take our advocacy position on the broker/dealer exemption rule to the next level,” says the 43-year-old president of TD Ameritrade Institutional. “We took a significant stand on the rule on the side of investors and of fee-based advisors [and are] the only custodian that can say that.”
Increased competition from brokers is what Bradley sees as among the biggest challenges facing independent advisors. “Full-commission brokers still are able to operate almost in such a way that makes them appear as if they are investment advisors,” he notes, pointing out that many consumers remain confused.
To counter that confusion, Bradley says TD Ameritrade is working diligently to help advisors educate the investing public.–Robert F. Keane
When told that he would be on the IA 25 list again this year, Bob Clark responded first not by expressing surprise or excitement, but by firing out questions about the list itself: “Is it meant to be the 25 most influential people over the last year,” he demanded, “or the 25 most influential people in general?” When informed that while the 25 were being honored for their past achievements but also because we judged that they would continue to be influential in the future, he had a quick response: “Oh, so it’s sort of a rolling average!” The exchange was pure Bob Clark: Question the meaning of a concept most everyone else takes for granted, put his own stamp on it, then place the concept into a broader context.
That’s what Clark, 51, has done for decades as a journalist, consultant, and professional noodge. Clark has strong opinions that he’s never shy about sharing, but those opinions are based on a long understanding of the forces and personalities that have shaped the profession about which he cares so deeply. He cares, but not so deeply that he doesn’t see the flaws within the very organizations that exist to ease the way for advisors but instead sometimes get in their way. “I have a vision of financial planners being a true profession,” Clark says. “There’s such a huge demand for qualified, trained professionals to give personal financial advice–that you can’t help but think that financial planning as a profession will continue to progress and become a profession despite what people do in the short term.”–James J. Green
Mark Casady has worked on both sides of the financial services fence, and on both sides of the pond, a background that has prepared him well to be a leader in the independent broker/dealer world as chairman, president, and CEO of LPL Financial Services. Casady, 46, joined LPL in 2002, filled in as chief during founder Todd Robinson’s sabbatical in 2004-2005, and assumed his current position following the sale of a majority stake in LPL to two private equity firms–Hellman & Friedman and Texas Pacific Group.
Is it hard stepping in the shoes of the charismatic Robinson? Casady says that in his career he’s been in situations that were “very difficult,” when he thought to himself, “Boy, I must not be doing terribly well. But then I realized it was a lot about the circumstances. At the same time, things are going remarkably well here, and it’s a lot about the circumstances, it’s not 100% about my abilities.” Casady lays LPL’s success squarely at the firm’s corporate culture. “It’s all about our relationship with the advisors,” says Casady. As an example, he notes that at LPL’s top producers conference, “every one of us always thanks the advisors for their business.”
That support is important, because “advisors have one of the toughest jobs in America,” he argues. “They have to convince people, against billions of dollars of advertising, not to spend money.” LPL’s culture also comes from the fact that the home office must continually try to provide value to all advisors, because “everybody’s on a 30-day contract,” says Casady, and “we have never cut a special deal with anyone.” Any cost savings or new services go to every advisor, not just the latest one to sign up.
Will that rep-centric culture shift with the ownership change? Casady says that when he asked the 700 advisors at the March advisors’ conference if they’d noticed any change since the ownership transaction was completed, they simply said no. He calls the private equity investment “just a change of corporate financial structure. It had nothing to do with the way we wanted to run the business. It had everything to do with giving the business the financial footing it needs to go forward.” Casady points out that LPL is “a big business now–$1.4 billion in revenues last year,” and that it “didn’t work quite so well to have individual ownership.” He says Texas Pacific and Hellman & Friedman have been “very good owners so far,” and that “they have a nice long-term view.”
As for the future, he argues that, “Scale will be the defining force in the independent B/D space over the next few years.” That’s a competitive environment in which Casady and LPL seem happy to compete.–James J. Green
Since replacing Bill Donaldson as chairman of the SEC last August, former California Congressman Christopher Cox has “given the industry, deliberately or not, a much-needed respite from a spate of regulatory actions that have been very difficult for the industry to digest,” says David Tittsworth, executive director of the Investment Adviser Association in Washington, D.C.
In early March, Cox, 53, gave the go-ahead to an SEC study that will address investment advisor and broker/dealer regulation. In announcing the study, Cox alluded to the Merrill Lynch rule that the SEC finalized last April, and said that the SEC wished to pursue some of the industry complaints that were lodged when the rule was approved. Cox acknowledged that the “distinctions between investment advisors and broker/dealers have become increasingly blurred,” due to changes in the industry, the law, and the marketplace. The study will address how to better “harmonize” broker regulation under the Securities Exchange Act and advisor regulation under the Investment Advisers Act. Keep your eyes peeled on the progress of this study as Cox said the SEC will be seeking input from the industry.
Cox recently appointed Merrill Lynch’s Andrew “Buddy” Donahue as director, Division of Investment Management. Cox said Donahue “will work with others at the Commission to continue to improve the usability of disclosures by mutual funds, closed-end funds, UITs, ETFs, and other funds available to retail investors.”–Melanie Waddell
Joe Deitch, chairman and CEO of Commonwealth Financial Network, says that one challenge facing advisors stands out: “The future success of this industry as well as all other advice-based professions is a function of their ability to leverage their wisdom and counsel.” Whether a doctor or investment advisor, too much of a professional’s time is “spent on low-level administrative tasks,” says Deitch. “Our job as a broker/dealer is to lift as much of the administrative burden from advisors as possible,” so they can “maximize their time, and talent, and how many people they can help.” One way Commonwealth does that, he says, is its hosted technology solution for everything from e-mail to imaging to a CRM database, so that advisors can access everything, 24/7, from anywhere.
On a personal level, Deitch notes that his greatest achievement is being a good father. Professionally, it is “helping to create and nurture an environment that attracts quality people for Commonwealth. I am tremendously humbled by the caliber of the people.”–Kathleen M. McBride
When Francois Gadenne launched Retirement Engineering, Inc. in 2001, an R&D company that develops product designs and packaging solutions to address retirees’ income needs, his company garnered little attention. But within the last year, financial services firms and advisors have changed their tune. Last November, Gadenne, 50, helped create the Retirement Income Industry Association (RIIA), a not-for-profit trade group designed to be a think-tank where execs from all corners of the financial services world–including advisors–can brainstorm on new products for retirement income. The biggest challenge for advisors and financial services providers is “truly understanding” how the shift from a focus on asset allocation to risk management will affect their business models, he says.