The financial reform bill has been an unusually contentious piece of legislation, inspiring strong emotions on both sides. Whether it is really good for the financial health of Wall Street and Main Street remains to be seen. But, like it or not, it’s now a reality.
So, it’s up to advisors to reposition their businesses to derive maximum benefit and minimum harm from the new legislation. After all, Wall Streeters have always been a practical, adaptable bunch. As the saying goes, “Don’t Fight the Tape.”.
Here are some positive ways in which advisors can respond to the inevitable industry changes ahead:
1) Recognize How the Retail Side of the Business Will Grow in Importance
The retail business is likely to become more important to the bottom line as firms pare back on profit centers that the financial overhaul has targeted – proprietary trading, credit-card business, and trading in derivatives and other esoteric products.
In a July 16 conference call, Bank of America projected that the bill overall would cost it $4 billion in annual revenues. Barclays Capital estimates $19 billion in industry wide costs.
In response, wirehouses will refocus on their core, Steady-Eddie wealth-management franchises. For advisors, this means more resources to deepen and expand advisor platforms.
I would therefore expect firms to compete to develop unique and complex offerings that will encourage their salesforce members to remain with the firm rather than opt to go independent.
With that, firms will selectively re-build their home office product specialist marketing teams that had been slashed after the 2008 market meltdown. Once retention awards expire, the firms will likely introduce a new generation of deferred compensation programs.
2) View This as a Chance to Showcase Your Investment Process
The financial overhaul is headed toward mandating a fiduciary standard, which major brokerage firms had fought but could turn out to be a positive development for the industry.