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Crossing Paths: The 2013 IA 25

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According to Neesha Hathi, Schwab’s senior vice president of advisor technology solutions, “50% of advisors in the United States use a tablet device, and 86% of them use an iPad.”

It’s the latest statistic illustrating the increasingly connected advisor business. With the 2013 IA 25, our 11th annual list of the most influential individuals in and around the advisor business, we decided to do something different. We decided to provide examples of how, exactly, the industry is becoming more connected, using the individuals on this year’s list as proxies. How is it that an industry is growing, while at the same time shrinking and more engaged?

Each of the individuals were named to this year’s list for their creativity, success and—of course—impact, something they’re doing largely through interaction and engagement with the others on the list, interaction driven by technology, advocacy and a host of other reasons. It’s one more reason to take the time to get involved with issues and concerns beyond your own business. Use your webs of connectivity to learn from the wisdom of the advisor crowd.

Mohamed El-Erian

Mohamed El-Erian, PIMCOMohamed El-Erian hardly needs any introduction. The CEO and co-CIO of investment giant PIMCO, who since the end of last year also serves as head of President Obama’s Global Development Council, is one of the most talked about, influential figures in international finance.

He spoke with Savita Iyer-Ahrestani by email on what he feels are some of the more pertinent issues for financial advisors today, both with respect to the global environment as well as to the shifting dynamics within the United States and how they affect the advisory profession.

Q: Do you think financial advisors have the right combination of knowledge and tools to help clients achieve a satisfying retirement? What’s lacking?

A: I believe the sources of return that allowed investors to meet retirement goals in the past won’t necessarily be the same that enable investors to meet their objectives in the future. I also believe that correlations are evolving and the configuration of risks is changing.

As a result, the challenge for all investors, including financial advisors, is to keep an open mind in looking for additional sources of return that fit clients’ needs, both return objectives and risk tolerances. This translates into broadening the opportunity set to take advantage of positive risk-return opportunities in all parts of the world, across asset classes and with a keen eye toward downside protection.

Q: Investment objectives aside, we have been reading a great deal about the importance of behavioral finance. Should financial advisors be making an effort to incorporate the principles of behavioral finance into their practices in order to cultivate the kind of deeper client/professional relationships that this post-crisis era calls for?

A: I do believe financial advisors should focus on cultivating deep client relationships to understand their clients’ risk and return objectives and any biases that may drive behavior. This is particularly important during this time of global change, where fluidity seems to be the only recurrent theme.

In PIMCO’s New Normal, I expect markets to exhibit higher volatility and a bumpier investment road than pre-crisis. For this reason, I believe it is important to invest for the long term within clear risk parameters, seeking to maximize an investor’s potential without being held hostage to tactical traps and harmful unconscious biases. Savita Iyer-Ahrestani

Read the extended version of Savita Iyer-Ahrestani’s exclusive interview with Mohamed El-Erian here. Click here for a schedule of when each of the 2013 IA 25 honorees’ extended profiles will be published.

Mary Jo White

All eyes will be on new Securities and Exchange Commission Chairwoman Mary Jo White as she decides which rulemakings to tackle first.

While White told members of the Senate Banking Committee during her confirmation hearing in March that she would “absolutely” make a priority of reviewing the public feedback the agency has been getting since March 1 regarding costs and benefits of a fiduciary rulemaking, she said that finishing rulemaking mandates under the Dodd-Frank and JOBS Acts “in as timely and smart a way as possible” will be her top priority at the agency.

One of her “focus” areas while chairwoman, White said, will be regulating the conduct of broker-dealers and advisors when giving retail investment advice.

She told lawmakers that bolstering the agency’s enforcement will be a priority, noting that while enforcement “must be fair, it also must be bold and unrelenting.”

Investors and all market participants, the former prosecutor said, “need to know that the playing field of our markets is level and that all wrongdoers—invididual and institutional, of whatever position or size—will be aggressively and successfully pursued by the SEC.”

White told lawmakers that among her list of priorities as she takes on her new job will also be to fully understand “all aspects of today’s high-speed, high-tech and dispersed marketplace so that it can be wisely and optimally regulated, which means without undue cost and without undermining its vitality”; and focusing on money-market funds, private fund advisors, credit rating agencies and clearing agencies. Melanie Waddell

Read Mary Jo White’s extended profile here.

Elliot Weissbluth, HighTower AdvisorsElliot Weissbluth

Last year, when we highlighted Elliot Weissbluth on the cover of our IA 25 issue, we said the HighTower Advisors CEO had changed the conversation on and about Wall Street. Where is that conversation now? “Like any other big topic, it hasn’t changed much in the past year,” said Weissbluth, before describing a rather big change: “More advisors have left the wirehouses,” he said. At the same time, “the level of tolerance that individual investors have has decreased.” What has increased is the “level of skepticism about these large firms—that they put their clients’ interests first,” while “the delineation between manufacturers and true fiduciaries is sharper.” Weissbluth said he’s “optimistic that the consumer is incrementally more sophisticated,” and he sees opportunity ahead as “the next generation decides what advisor they’ll use.”

It’s not so much that the next generation of clients doesn’t trust advisors, he said; instead it’s about “service model modality.” He argued: “Do millennials want to be serviced the way their parents were?”

He compared the future prospects of wirehouse firms and independent firms like his. “Do the incumbent firms servicing the majority of investors have the prescience and the commitment to invest and change their businesses” to meet the needs of that next generation? “No,” because the independent firms “are significantly ahead in innovative technology and solutions, and the big firms are playing catch-up and may never catch up.” James J. Green

Read Elliot Weissbluth’s extended profile here.

John Taft, RBC Wealth ManagementJohn Taft

For John Taft, head of wealth management at RBC Wealth Management, managing clients’ wealth is part of a higher calling.

“Our focus is entirely on quality and excellence, not on scale,” he said, adding that the firm has about 2,000 advisors. “We think that’s large enough to be relevant and meaningful, but small enough to be intimate. We’re happy with the scale. We’re just committed to being better in every way: hiring the best advisors, putting the best products and services on our shelf, and continuing to build out our technology and operational platform.”

Among the biggest challenges for advisors, of course, is the regulatory storm coming from policymakers. “Advisors and the wealth management industry generally, of which they are a critical part, are experiencing a tsunami of new regulation, some of which has already hit our shores, but a lot of which is on the way,” Taft said.

Another big challenge, though, is the shape of the industry itself. “The business model is evolving from a sales model to a far more consultative and professional model, and is evolving from product specialists to holistic wealth management,” according to Taft.

Fiduciary is a topic on most advisors’ minds, but Taft suggested they should set their sights higher. “Stewardship,” he said, “is all about responsibly managing what others have entrusted to your care.” Stewardship is a “close cousin” to fiduciary, Taft said, but it goes a little further. “Fiduciary is a minimum legal standard. Stewardship is a higher standard even than fiduciary. It means thinking about others, i.e., your clients, in everything you do.” Danielle Andrus

Read John Taft’s extended profile here.

Jud Bergman, EnvestnetJud Bergman

Envestnet may have begun as a turnkey asset management provider, where it remains a leader punctuated by its announced acquisition in mid-April of Prudential’s Wealth Management Services. Even that acquisition signals more of an evolutionary development than a turnabout for the company. When that acquisition was announced, Chairman and CEO Jud Bergman noted that “most of our new advisor and enterprise relationships are some kind of a conversion from a legacy” business model.

Even before making its acquisitions over the last few years of FundQuest, Prima Capital and Tamarac, “that kind of conversion became a core competency for us; it plays to our strength” as a company that, as we wrote in a June 2011 cover story here, Envestnet “stands at the crossroads” of the major issues facing advisors then and now.

Getting back to Envestnet’s primary goal, Bergman said “the fundamental undertaking of Envestnet when we started was to unify and fortify the wealth management process through good technology, and then the necessary services advisors would look for—back office, billing administration—to free advisors up to do their highest value activity—meeting with clients and prospects, and solving investment issues.”

What’s next for Envestnet and the industry? Bergman sees a “rapid movement from desktop solutions to fully mobile solutions; we already have advisors using the Envestnet platform with clients through their iPads.” Another example is benchmarking. “Larger firms are looking to deploy business intelligence—how certain advisors perform against certain benchmarks.” JG

Read Jud Bergman’s extended profile here.

Mark Tibergien, Pershing Advisor SolutionsMark Tibergien

Mark Tibergien has been writing for Investment Advisor now for more than a decade. Not coincidentally, he is also the only person to appear on the IA 25 for all 11 years of its existence. But Tibergien’s influence on the industry started before his affiliation with us, and in the history of the independent advisory business, Tibergien’s influence will last far beyond 2013. That’s because almost single-handedly he has preached that to become a profession, advisors must be business people. Tibergien has consistently raised thorny issues that some advisors would rather avoid and has used his bully pulpit to challenge advisors to be not only good business people but true leaders as well.

While he’s achieved appropriate fame for focusing on the business side of an advisory firm, the needs of the end client are always front of mind.

His take on the fiduciary standard is similarly double-sided. While that standard might be the right and best approach for the client, it’s also the prism through which an advisory firm’s business practices should be measured.

Tibergien’s legacy is evident not only in his own leadership and unparalleled intellectual capital contributions, but in the loyalty and admiration of many of the other leaders of the profession.

The Tibergien gospel? Be a good businessperson; be a good leader in your firm’s culture and even (as he writes this month) in the language you use in your firm; keep a firm watch on your day-to-day practices and the eventual future of your firm; and make sure you are exercising your own talents and building an environment where your employees can grow and prosper. JG

Read Mark Tibergien’s extended profile here.

Nouriel Roubini, NYU Stern SchoolNouriel Roubini

“2morrow I speak at Long-term Global Trends & Their Implications for the IMF,” Nouriel Roubini recently tweeted, which is typical, since he’s everywhere and seemingly always reacts to the latest financial crisis in real time.

Davos, IMF meetings, on the phone with the ECB; you name it, he’s there. It’s enough to make one forget his day job as an economics professor at NYU’s Stern School. In addition to teaching, he’s chairman of Roubini Global Economics, a research firm on global economic strategy whose website is a gathering place for leading voices on political and economic affairs. But don’t take our word for it; has been named one of the best economics Web resources by BusinessWeek, Forbes, The Wall Street Journal and The Economist.

Then there’s his use of social media. His roughly 240,000 followers receive a daily dose of analysis that isn’t afraid to employ salty language from time to time (austerity proponents and the Tea Party are frequent targets of his ire).

Roubini received an undergraduate degree from Bocconi University in Milan, Italy, and a doctorate in economics from Harvard University. Prior to joining Stern, he was on the faculty of Yale University’s department of economics.

We highly recommend his latest book, “Crisis Economics: A Crash Course in the Future of Finance.” It’s a fun read with strong opinions that mirrors Roubini’s personality. But if you don’t have the time, don’t worry; he’s not hard to miss. John Sullivan

Read Nouriel Roubini’s extended profile here.

Jon Sundt, AltegrisJon Sundt

Jon Sundt doesn’t have time for pleasantries. He’s got too much going on. He’s in liquid alternatives, after all.

“There is a tremendous demand for liquid alternatives, and in particular the products we’ve recently introduced,” Sundt, president and CEO of Altegris Investments, said at the outset of our interview. “I believe it’s a historic time for the industry. Return expectations are coming down for hedge fund managers and, in the wake of 2008, investors are afraid of lockups.”

Hence the demand for something more liquid, which means managers who “would not have looked at a mutual fund product a few years ago are looking at them now. They’re looking for more capital as well as looking to diversify. The retail investor base is where the capital is, and alternatives offer a number of ways to diversify.”

All of this explains the firm’s success; it’s at the nexus of these critical—and lucrative—trends.

“We believe every investor deserves access to quality managers,” Sundt emphatically stated. “We’re open-architecture and put best-of-breed managers into packages that retail investors can consume. As a result, from a distribution standpoint, we’re on all the major wirehouse platforms, and we’re running as hard as we can to complete our product suite.”

He pointed to two new products as proof; a multi-strategy fund that “gives an advisor access to 20 managers with the click of a mouse,” as well as a fixed-income long/short fund that is in “an incredibly attractive space right now.”

The excitement that seems to naturally flow from Sundt translates to the firm’s annual Strategic Investment Conference as well. The 2013 lineup of speakers was described by one attendee as “intimidating.” With Jeffrey Gundlach, Mohamed El-Erian, Nouriel Roubini, Ian Bremmer, Gary Shilling and David Rosenberg, among others, it’s easy to see why.

“The Strategic Investment Conference is a byproduct of what we do, which is to bring together top managers and economic thought leaders to capitalize on their perspective,” Sundt noted. “This is the 10th one we’ve done.”

Very well, but how exactly does he attract such talent?

“Well, San Diego is nice,” he laughed, before adding, “We have a good reputation in the industry. We have advisors in the audience that these managers want to get in front of.”

The type of people Mohamed El-Erian wants to get in front of; we think Sundt’s on to something. JS

Read John Sundt’s extended profile here.

Jeffrey Gundlach, DoubleLineJeffrey Gundlach

Jeffrey Gundlach and 40 or so loyalists started up their own firm, DoubleLine Capital, in the face of a lawsuit charging him with misappropriating TCW trade secrets.

Gundlach suffered dark days and accusations flew, but he and his followers kept their plucky startup going until the clouds parted.

Today, Gundlach is described in the business media as “a Wall Street savant” (even though he’s Los Angeles-based), “the king of bonds” and “a bond god.”

“We have the most popular fund in America,” he explained. “Being No. 1 is difficult on the competition, and they embark on negative campaigning. That goes with the territory. ”

Gundlach, meanwhile, is more interested in talking about the recent launch of his firm’s first stock fund, the DoubleLine Equities Small-Cap Growth Fund (DLESX), and the success of some pair trades he has recommended over the last year.

Back in May 2012, Gundlach said, he shorted Apple Corp. stock and went long natural gas. Sure enough, he said, that pair trade is now at 125%. Meanwhile, he noted, his “go long the Nikkei and short the Japanese yen” trade from December went up 65%. Now, he’s looking at going long Spanish stocks on the IBEX and shorting U.S. stocks.

“I look for pair trades where the risk-reward is dramatically skewed with ridiculous pricings,” Gundlach said. “Pair trades are interesting because you don’t have to have a definitive view. You just have to understand that things will keep happening due to policy manipulations.”

While it’s impossible to train people to think the way he does, Gundlach said, his DoubleLine colleagues are a happy bunch.

“No one ever leaves. It’s not like a revolving door. We like working together,” he said. Joyce Hanson

Read Jeffrey Gundlach’s extended profile here.

Chet Helck, Raymond JamesChet Helck

For Chet Helck, CEO of Raymond James Global Private Client Group, and as of October 2012 the chair of SIFMA, the biggest challenge for advisors over the next year is simply dealing with the uncertainty in the markets and in consumers’ minds.

“People are still somewhat in shock from the business cycle we’ve just been through,” he said. “Even though the market’s come back, we’ve been through a long period of time where people have not seen a lot of positive market momentum.”

Further compounding the problem is that with the baby boomers, record numbers of investors are retiring. “It’s hard to get clients to have confidence in doing anything and certainly in being able to accomplish objectives without taking undue risk.”

To mitigate those challenges, the most successful advisors have become so by working “with clients early to try to accumulate enough principal where generating sufficient income is more doable,” Helck said. “Where they have not had the ability to do that, where it’s already retirement time and you now have to live with what you’ve accumulated, the strategies to create income have gotten to be far more sophisticated.”

That increased sophistication requires assistance from a financial advisor, Helck said, but also makes the job of the financial advisor far more challenging. “Rather than just generating interest in dividend income, it requires more elaborate strategies where you accumulate and then start liquidation of certain parts of the portfolio.” DA

Read Chet Helck’s extended profile here.

Larry Roth, Advisor GroupLarry Roth

“I haven’t seen a weekend since the wheels came off in 2008,” said Larry Roth. “All of this gives me energy.”

The “this” he refers to is his role as 2013 chairman of the FSI, chairman of the Insured Retirement Institute and his day job as president and CEO of Advisor Group, one of the largest IBD networks.

“FSI has been around for a number of years now,” he said. “It’s led by Dale Brown, who has brought in people to fill key positions who are CEOs of independent broker-dealers. Most of the big firms are now represented, as are mid-size firms and those that are privately held.”

Specific to the Advisor Group, which is owned by AIG, Roth is most excited about the fact that the network is “back in growth mode.”

“We have 6,000 advisors and a retention rate last year of 97%. We also acquired Woodbury Financial in 2012 [from The Hartford], and I am really excited to work with president and CEO Pat McEvoy and his team.”

In addition to recruiting financial advisors from other broker-dealers, Advisor Group is exploring ways to bring new advisors to the industry. For example, it’s partnering with a sister AIG company, AGLA, “to transform its career distribution force.”

Advisor Group is helping AGLA career agents “adopt a broader, full-service financial planning model. It’s a unique way to bring new advisors to our industry and one we’re confident will be successful.” JS

Read Larry Roth’s extended profile here.

Richard Ketchum, FINRARichard Ketchum

It’s no secret that investment advisors are opposed to the Financial Industry Regulatory Authority becoming the self-regulatory organization that steps in to examine them—and, at least for the near term, it looks as though their wish has been granted.

As Richard Ketchum, FINRA’s CEO, said in a recent email exchange with IA, “given the lack of consensus on the Hill” regarding an SRO for advisors, FINRA “is not pursuing legislation in either the House or Senate at this time.”

While Ketchum said he would support allowing the Securities and Exchange Commission to assess user fees to boost advisor exams “if it becomes an achievable solution,” he doesn’t see a consensus among lawmakers to move forward with that option, either.

Rep. Maxine Waters, D-Calif., ranking member on the House Financial Services Committee, re-introduced her user fees bill in mid-April.

However, Ketchum told IA that FINRA “continues to believe that the current levels of investment advisor oversight and examinations are unacceptable and a risk to investors, and that this significant gap in investor protection needs to be addressed.” It’s undeniable, he said in his email, “that proper and timely oversight of investment advisors needs to be put in place sooner rather than later.” MW

Read Richard Ketchum’s extended profile here.

Phyllis Borzi, EBSAPhyllis Borzi

Despite taking a drubbing from the industry over her insistence on issuing a rule to amend the definition of fiduciary under the Employee Retirement Income Security Act, Phyllis Borzi remains steadfast in her conviction to do so.

After pulling the original draft of the fiduciary rule last year, Borzi and her team at the Department of Labor’s Employee Benefits Security Administration are planning to release a re-draft of that rule in July.

In an email exchange with Investment Advisor in mid-April, Borzi said that while EBSA’s regulatory agenda states the rule proposal’s release will come then, “we’re going to take the time we need to get this right.”

Indeed, industry officials say to expect a firestorm of opposition once that reproposal is released. While Borzi has said the reproposed rule will be backed by a “substantial economic analysis,” some industry officials argue that extending the fiduciary rule to IRAs and rollovers—which Borzi has indicated will be part of the reproposal—will cause significant problems.

Borzi told IA that EBSA will, as with the original fiduciary proposal, seek public comment on the reproposal issued this summer. “We take into account comments on every proposal that we put out there,” she said. “I think that is evidenced in our behavior since we first proposed an end to conflicts of interest in the retirement marketplace in 2010.” MW

Read Phyllis Borzi’s extended profile here.

Dale Brown, FSIDale Brown

When reminded that this is the seventh year that he’s been named to the IA 25, Dale Brown was quick to give kudos to his entire team, noting that Financial Services Institute’s success doesn’t hinge on his abilities alone. FSI’s staff, Brown said, “sets priorities and makes sure those priorities are relevant to our members.”

Since moving FSI’s headquarters from Atlanta to Washington three years ago, FSI’s membership has more than doubled—jumping from 15,000 advisor members to 35,000 today. The trade group’s budget during that time has shot up as well, going from $3.5 million to more than $7 million. FSI’s broker-dealer members now total 107.

Brown said one of FSI’s top goals this year is bringing more advisor members on board and “getting them personally involved in our advocacy mission.”

As to FSI’s other priorities, Brown said the trade group has three: opposing the Department of Labor’s fiduciary rule reproposal, which is due out in July; the “continued fight” regarding advisors’ independent contractor status, with proposals at both the federal and state level that will make it more difficult for companies to classify workers as independent contractors; and leveraging FSI’s existing resources to make the Financial Industry Regulatory Authority “a more effective regulator.”

Said Brown: FSI is “working on the right issues; it’s challenging, but we’re getting results.”

As to DOL’s efforts to redefine the term fiduciary under ERISA, Brown has said DOL’s proposal “would suddenly hold broker-dealers who work with company-sponsored retirement plans and IRAs to a different standard of oversight, one that would not be aligned with Main Street American investors’ needs.” MW

Read Dale Brown’s extended profile here.

aRIAThe Alliance for RIAs Study Group (aRIA)

Go to any conference where registered investment advisors meet, and it’s clear from the buzz in the room that RIAs like to talk. Only rarely, though, does the subject come up of how much their company is worth.

To break the silence around real enterprise value, a group of six successful RIAs got together last year and committed to sharing their experiences to help the industry build independent firms that are truly sustainable. Called the Alliance for Registered Investment Advisors, or aRIA, this boutique industry association with more than $20 billion in client assets has established itself as a new think tank with a mission to provide intellectual capital and thought leadership to the wealth management community.

ARIA’s group members are a mighty team. They include Matt Cooper, president of Beacon Pointe Wealth Advisors, and Neal Simon, CEO of Highline Wealth Management, both of whose firms were selected for AdvisorOne’s 2012 Top Wealth Managers list. Also on the team are industry leaders Brent Brodeski, CEO of Savant Capital; John Burns, principal at Exencial Wealth Management; Ron Carson, CEO of Carson Wealth Management Group; and Jeff Concepcion, CEO of Stratos Wealth Partners.

This year, Brodeski, Carson and Simon were selected to Barron’s Top 100 Independent Financial Advisors, noted John Furey, principal at Advisor Growth Strategies LLC (AGS), who serves as aRIA’s managing member. Everyone in the group is solidly midpoint in seasoned careers, with no plans to sell and certainly no plans to retire any time soon.

“We’re all in it to build long-term sustainable businesses,” said Furey, a former director of strategic business development at Schwab Institutional. “As an industry, we don’t talk enough about who’s doing transactions and deals. Our group is doing deals, and then we’re sharing our knowledge for free with the industry. We’re walking our talk because transactions are happening, and we’re proud of that.”

One such deal involves Newport Beach, Calif.-based Beacon Pointe’s recent addition of Independent Financial Advisors, a Riverside, Calif., RIA with $100 million of assets under management. Representing Beacon Pointe’s fourth RIA rollup in just four months, the deal highlights a partnership model that places a premium on long-term growth and sustainability, Furey said. JH

Read aRIA’s extended profile here.

Bernie Clark, SchwabBernie Clark

You could argue that the leader of Schwab Advisor Services is influential every year, owing to Schwab’s position as the largest by far of the RIA custodians measured by number of advisors and assets under management. It’s especially appropriate to single out Bernie Clark, who has led SAS since 2010, as one of the 25 most influential people in the industry by dint of his confident leadership in not merely growing Schwab’s custody unit, but in identifying and acting upon many of the most trying issues faced by advisors. Those issues include succession planning, practice management, technology, identifying and growing the next generation of advisors and increasing RIAs’ prominence in the consumer marketplace and in the corridors of power in Washington.

Take technology, for instance. “Two years ago, our advisory board” of RIAs said “mobile is not a priority,”Clark said in an April interview, before pointing out “how quickly people can transition” to the benefits of mobile technology, particularly in working with end clients. Using mobile technology will eventually allow advisors to reach the point where “two or three meetings become one meeting.”

Beyond mobile, Schwab’s nearly three-year-old Intelligent Integration project, part of an open-architecture “eco-system” approach that, Clark said, is a “10-year program,” allows advisors to integrate their standalone applications into the Schwab platform, such as what it’s already accomplished in CRM applications by working with SalesForce and Junxure. Last year, Schwab introduced MarketSquare, which allows Schwab RIAs to rate technology providers in a “Zagat-style way,” and also added an e-signature option for end clients through DocuSign. JG

Read Bernie Clark’s extended profile here.

William Galvin, Secretary of the Commonwealth of Massachusetts William Galvin

Since taking on an additional 139 advisors with $6.6 billion in assets under the Dodd-Frank “switch,” Massachusetts has “been able to do what the Securities and Exchange Commission hasn’t”—adequate examinations of those advisors, said William Galvin, Secretary of the Commonwealth of Massachusetts and its securities regulator.

Since last June, when advisors with assets of between $25 million and $100 million under management were required to switch from federal to state jurisdiction, Massachusetts has already examined 40% of the new firms under its purview, Galvin told Investment Advisor.

For instance, while about 15% of the new advisors custody assets, Galvin said, Massachusetts examiners found that some advisors “were not reporting having custody of client assets over which they serve as a trustee or executor,” which under Massachusetts law must be included in total assets under management. When advisors are trustees they have a “different level of authority,” and “can move funds out of [a client’s] account,” setting up a “different relationship” with the client, he said.

Indeed, with a total of 929 advisors under its belt, Galvin said Massachusetts has “repositioned” exam personnel to be more efficient and to help create economies of scale when it comes to examining advisors.

Galvin said the state hasn’t noticed any “inherently evil” practices from those advisors. “We don’t want to be burdensome” on these advisory firms, he said, most of which are small businesses. In fact, he said, “it’s the people who aren’t registered” that present the biggest problems for the state. MW

Read William Galvin’s extended profile here.

Michael Finke, Texas Tech Dr. Michael Finke

The traditional 4% withdrawal rule is fine in a static world, but when was the last time the world was static?

For this reason, Michael Finke, professor of personal financial planning at Texas Tech, called the success of the traditional 4% rule a “historical anomaly” in a working paper published in mid-January.

“The 4% rule was based on the historical asset return in a market environment that doesn’t look like the one that exists today,” Finke told Investment Advisor in March.

“Our intention was to acknowledge the reality of lower returns moving forward,” Finke recently explained, which in and of itself isn’t controversial. But the methodology used and the conclusions he arrived at started a healthy debate over the best way to ensure clients’ money lasts.

“Asset returns are a random walk. No one knows what bond returns will be in the future, but the market believes they will be negative,” he said. “TIPS, for instance, are already negative. Nominal returns might go up, but real returns will be negative. It will either be a situation where they will be 0% for 20 years or slightly negative for 10 years.”

So how did he arrive at such a bleak outlook? Not how one would think.

“We used the same methodology as others, but we did it to prove a point,” Finke added. “The point was that we don’t think the traditional withdrawal rates will address retirement income shortfalls; the supposedly safe methodology isn’t as safe as it was in the past.” JS

Read Michael Finke’s extended profile here.

Angie Herbers, Angie Herbers Inc.Angie Herbers

Angie Herbers has been working with financial advisors for over a decade and has been writing for this magazine for almost as long. As the founder of Angie Herbers Inc., her firm has worked with practices of all stripes.

“They all deal with the same fundamental problem: growing a scalable business with profitable clients while attracting the next generation to take over the firm,” Herbers told IA by email.

The company is more than just a consulting firm, though. “To the industry, Angie Herbers Inc. (AHi) is known as a consulting company,” Herbers said. “What most people don’t know is that we have a research division in our company that has sat quietly behind the scenes.”

Until recently, that research was done solely for AHi clients, but Herbers said that over the next two years, custodians and broker-dealers will have access to “all our research, solutions and systems.”

She added, “In the next two years, the industry will see AHi transition into a practice management educational institution with 100% access to our 12 years of research in the advisory industry.”DA

Read Angie Herbers’ extended profile here.

Valerie Brown, CeteraValerie Brown

It seems inevitable that Valerie Brown should end up where she is. The daughter of a financial planner, the CEO and president of Cetera Financial Group said she grew up with a love for and comfort with numbers and math. Her background in chemical engineering, which she called a “perfect fit” for the financial services industry, didn’t hurt either.

“Chemical engineering teaches their students to take what are often pretty ambiguous problems and structure them and try to identify practical solutions,” Brown said of her undergraduate studies. “That’s a good overview of what many of us in this industry deal with: challenging problems and helping clients figure out their retirement plan in an environment where interest rates are pretty close to zero.”

In fact, that particular challenge is one of the biggest affecting advisors today. “Given that a lot of clients and retirement assets are sitting with the baby boomers, who are either entering, in or close to retirement, this low-interest-rate environment is challenging everybody,” Brown said. Also hitting boomers and their retirement strategies is “a pullback in the insurance industry from giving people guaranteed income that a lot of the annuity products provided.”

There is good news, Brown said. “The market’s done very well. This is the fourth year running that we’re having a continuation of good market returns.” She noted, though, that “while clients’ fee-based businesses continue to do well, the commission side of the business has not been growing as rapidly as it was pre-crisis. That tells you middle-market America, where commission-based products often fit better, is still standing on the sidelines.”

Those “stresses,” as Brown called them, affect not just advisors, but product manufacturers as well. “Continuing to innovate around those issues is a challenge for all of us as we go forward,” Brown said.

Brown said Cetera’s main focus is “continuing to help our advisors grow their practices, their relationships with their clients and serve them better every day. That’s what they’re focused on, and we’re focused on supporting them in doing that.”

Cetera recently announced it will add about 800 advisors when it acquires Tower Square and Walnut Street from MetLife, bringing its advisor count to nearly 7,000. “It’s another significant step forward and [confirms] our strategy that having multiple faces of independence has a real solid place in this industry where you can have the best of both worlds,” Brown said. DA

Read Valerie Brown’s extended profile here.

Michael Kitces, Pinnacle Advisory GroupMichael Kitces

As he ticks off trends he sees in the advisor industry, Michael Kitces, publisher of the e-newsletter The Kitces Report and the blog Nerd’s Eye View, envisions that technology-augmented advisors will trump traditional advisors over the next 10 years. Indeed, Kitces foresees that society is headed toward a central computer experience where all the world will be a supercomputer—and, no surprise, he proudly lays claim to being a big nerd.

“I’m a Star Trek fan, a Star Wars fan, a Firefly fan. I’m a nerd,” said the 35-year-old, two-time IA 25 winner. (Kitces, whose thoughts appear frequently in the pages of Investment Advisor as well as on sister website AdvisorOne, also was an IA 25 honoree last year).

Kitces’ nerd-dom is the advisor industry’s gain. His thoroughness when studying financial planning has not only led to his earning a string of designations—MSFS, MTAX, CFP, CLU, ChFC, RHU, REBC, CASL—but has allowed him to bring his knowledge to the conference circuit as a sought-after speaker. In the last year, Kitces has completed 55 speaking engagements. JH

Read Michael Kitces’ extended profile here.

Greg Friedman, Junxure and Private OceanGreg Friedman

Greg Friedman began the interview by noting he didn’t have much prepared and would probably end up speaking in a stream of consciousness. If so, it’s the most succinct stream of consciousness we’ve yet encountered.

“I think a lot about the incredible sea change that’s coming in the way clients work with advisors and how it will change the competitive landscape,” he said, before self-consciously adding, “I know that’s not really new, but I have a new way of looking at it.”

Friedman, who describes himself as the hardest working man in wealth management, is president of both advisor CRM-provider Junxure and Private Ocean, an innovative West Coast wealth management firm. He also describes himself as someone who never really believed that human interaction on a personal level would be superseded by technology, and always said as much. He’s now beginning to change his mind.

“Think about psychiatrists, for example,” he noted. “They’re employing video conferencing and mobile chat. Situations that are considered very personal, and financial advice would certainly fall into that category, are increasingly making use of communication technology.” JS

Read Greg Friedman’s extended profile here.

Eleanor Blayney, CFP BoardEleanor Blayney

Eleanor Blayney took on the role of the CFP Board’s Consumer Advocate right at the beginning of 2009, after several months of discussions with CFP Board CEO Kevin Keller developing the position before the “true meltdown” took place.

“It was almost coincidence that the position we thought about in the middle of 2008 was more needed than ever,” the veteran advisor said. “We both acknowledged that Americans needed to understand more about the financial planning process and needed to understand more about the CFP designation and exactly what went into it.”

She continued: “Five years ago we suffered a very large blow to the system. The financial structure of our country was pretty wobbly. It was very difficult to see clients that many of us have worked with for years, to see the ground shake beneath them. Unfortunately with the Madoff scandal and the Stanford scandal, consumers’ trust was shaken, but they didn’t understand exactly how our industry works and who was out there to help them.

“It was a time when we really earned our mettle,” Blayney said of the period immediately after the crash. DA

Read Eleanor Blayney’s extended profile here.

Bill Winterberg, Morningstar AdvisorBill Winterberg

Bill Winterberg, a certified financial planner with a bullish view on the future of technology in the advisor space, describes himself as squarely positioned in the Gen X/Gen Y demographic.

A tech columnist for Morningstar Advisor and tech contributor to the Financial Planning Association’s (FPA) Journal of Financial Planning, Winterberg also consults with advisors on choosing the right solutions for their practices. His experience comes from his background as an embedded software engineer for Hewlett-Packard Co. and app-heavy LeapFrog Toys.

As for current trends he’s seeing, Winterberg pointed to the Securities and Exchange Commission’s recent decision to allow publicly traded firms to post announcements on social media such as Twitter, LinkedIn and public Facebook pages. He also sees big data making a greater impact on financial advice in the future, with advisors using marketing data about consumers to build portfolios based on demographics such as age and annual income.

Meanwhile, Winterberg said, advisors will do more to use social intelligence to influence their communication with clients. He named his tech-savvy friend and fellow financial-planning consultant (and fellow IA 25 honoree) Michael Kitces as a case in point.

“Michael and I are in a study group together and—I can brag a little bit here—I told him, ‘Michael, you’ve got to get on Twitter.’ I had 1,000 followers at the time, and he had zero. Now, he has more than 7,000 followers, and I’m just below 5,000.” JH

Read Bill Winterberg’s extended profile here.

Olivia Mellan, Money Harmony Olivia Mellan

“We live,” Olivia Mellan told us, “in an adolescent society” marked by a short-term orientation, where people “don’t plan ahead and look at the whole picture.” That is where advisors can help, acting, as Mellan likes to say, as “therapeutic educators” who “walk the talk.” Since they “have a peaceful lack of anxiety in talking about money,” they are then able to lead their clients to apply the tools needed to achieve their goals.

So if that’s what advisors can do, what does Olivia Mellan do? She has been a couples therapist for decades, is creator of the “Money Harmony” concept, is a highly entertaining (and educational) speaker, runs multigenerational family workshops and is the author of five books with her long-time writing partner Sherry Christie. As a therapeutic educator herself to advisors, Mellan’s influence in the industry is subtle but real. Particularly over the past few years, Mellan has expanded her Psychology of Advice column in this magazine to explore areas as diverse as the rising incidence of divorce among older people, the latest advances in brain behavior and how to help client couples with divergent expectations and needs prepare for retirement.

What about the naysayers who denigrate advisors who follow Mellan’s approach as being practitioners of only the “soft side” of financial planning? “They’re not therapeutic educators; they’re not providing holistic financial planning if they put down emotion. Brain studies show emotion is always involved in financial decision-making; people never make decisions based on their rational brain.” JG

Read Olivia Mellan’s extended profile here.


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