A Tipping Point?

It’s always easier to discern a trend with the use of hindsight. But I believe that the business of independent advice-giving has finally reached a turning point. My first issue as managing editor of Investment Advisor in 1999 featured a cover story by Bob Veres writing about the CFP Board’s new (at the time) practice standards. It was pretty inside-baseball stuff that mostly focused on the disagreements that CFP certificants had over the standards. Sparing you the details of the issues that surfaced over the next 12 years, it seemed that many advisors continued their navel gazing, as in the “fees versus commission” or the “Do you need a CFP to be an FPA member?” debates, or even, dare I say it, the fiduciary imbroglio. However, in 2011 the independent advice business has finally come of age.

I say that because the smart money all around us, and the regulators, have “discovered” independent advice-giving. One of my first clues was when Sallie Krawcheck said in a January 2010 teleconference that despite “industry chatter” to the contrary, “we haven’t seen nearly as much” movement from the brokerage channel to the RIA space. Krawcheck, the head of Merrill Lynch, BofA’s brokerage force, was talking about RIAs and claiming that Merrill and its wirehouse brethren were not losing people to the RIAs. Pooh-poohing the competition usually indicates that you actually have competition, and you’re concerned about it. The Yankees don’t have to say that the Mets are no good (and I’m a Mets fan).

A second sign of this transformation has been the increased political savvy and efforts of both the Financial Planning Association and the Financial Services Institute. They disagree on a number of topics, but they agree heartily that while the inside baseball of internal discipline is important, getting the independent advice model’s voice heard in Washington is where you have to start, especially in the wake of the financial crisis and Dodd-Frank.