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Portfolio > Portfolio Construction

Ironically, Good Times for RIAs

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If you would indulge me, I’d like to break from my normal RIA update and editorialize a bit.

“It was the best of times; it was the worst of times.” The opening words from A Tale of Two Cities may in fact aptly describe the recent past in the financial services industry.

It was the worst of times for many large firms that decided to chase returns without serious consideration of the risks. It was the worst of times for those unfortunate advisors who found themselves caught in the middle, having to explain to clients how the actions of their respective employers were a factor in the clients’ declining portfolio values. It was also the worst of times for clients who were invested with the large “sweatshop” firms. Those are the companies that continually put pressure on their advisors to bring in more and more business, even as capacity issues caused service to suffer. It was this lack of attention which greatly contributed to the global warming, or should I say, the subsequent melting of clients portfolios. Yes, it was the worst of times.

However, it was the best of times for the independent advisor, and specifically for the Registered Investment Advisor. There was, and continues to be, a changing of the guard in the courtyard of financial services and this may continue for some time. I believe clients are beginning to realize that their interests are much better served when the conflicts of interest, which are so prevalent in large firms, are banished from the equation.

Clients are better served when the goals of shareholders are not a factor and when advisors are free to make choices, based not on what’s good for their company, but rather what’s best for the client. To adapt a famous quote from JFK, “Think not what you can do for your company; think what you (and your company) can do for your client.”

Yes, the day of the independent advisor is upon us. What concerns me is the powerful lobby of the large financial firms and the influence they have on Washington. There will certainly be a plethora of new legislation passed in the coming months. I only hope Washington will be as client-focused as we are.


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