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Tibergien, Shea: How Advisors Can Rebuild Industry Image

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Mark Tibergien says there’s a fairly straightforward way for financial advisors to both improve their business and that of the broader industry, while getting more Americans to improve their financial health: Boost financial literacy.

The CEO of Pershing Advisor Solutions made his push on Thursday during the company’s INSITE gathering in Hollywood, Fla. His views were echoed on Friday by Brian Shea, president of investment services at BNY Mellon, Pershing’s parent company.

“I want to appeal to you about something that can transform” our society, said Tibergien, “since we know that financial illiteracy is rampant.”

The advisor guru explained that today’s young adults do not get exposure to basic financial issues in high school and are simply “not prepared to deal with credit cards, banking, etc.”

Many individuals today “are in dire straits, once again,” Tibergien explained, “and at its core are many of the factors that contributed to financial meltdown in ’08,” such as large levels of debt and the use of risky financial products.

At the same time, he notes, the level of trust in banks and financial institutions is very low, and the industry is unable to attract the talent it needs to thrive.

That raises the question, he says, “Is there a correlation between the level of financial literacy, the reputation of the industry and its lack of appeal to those looking at this work?”

As today’s advisors retire, the financial-advice business will need about 230,000 replacements. Yet, the industry is only about to hire about 12% of its workforce right out of college.

“Only about a third of consumers think advisors look out for their best interest …,” Tibergien said. “Many in Congress say our business is for criminals and crooks, and there are plenty of folks who think the [financial] system is rigged against them.”

Among advisors, 37% say they would not recommend the job to their children or others.

Literacy Lesson

But advisors can turn this around.

“My premise is that the Great Recession was caused by the rampant level of [low] financial literacy … which makes it easy for consumers to be susceptible to those who want to take advantage of them,” he shared.

“If you had more literacy, would you be as vulnerable?” Tibergien asked, suggesting that the answer to the question has serious implications for the advice business.

“The point is not to depress you, but to stir you,” the practice-management expert said. “Is there anything we can do? Our industry is not trusted by prospective employees and clients. It’s time to act!”

One step that can make a difference is for advisors to define their legacy and then move on it. “Could you help create a better environment for investors to do business in?” Tibergien posed.

The task may appear big, but engaging in financial literacy activities is not necessarily as daunting as it seems at first.

For his part, Tibergien reached out to a high school in his hometown in Michigan’s Upper Peninsula. He was able to fund both an extra-curricular instructor and materials that exposed about 30 students, or 20% of the school, to finance.

“Could you adopt your old school?” Tibergien asked the audience of about 2,000 advisors. “What about sponsoring a summer intern or scholarships? This will be good for you and will change the image of our business profession.”

“In a profoundly changing marketplace, I invite you to make one small step,” he said.

Rapid Change, Expanding Opportunities

Shea underlined the challenges facing both advisors and investors today. “It’s the most dramatic period of economic and financial change since the 1930s,” he said on Friday at INSITE.

While the level of debt to gross domestic product is coming down, “The process still has a long way to go,” Shea added. “Our best advice is for you to run your business as if the economic conditions will not improve.”

“Economic and regulatory change is already creating structural change in our industry and it’s likely to accelerate,” he said at the beginning of his presentation.

He pointed to the high level of cash assets in client accounts, about $110 billion. “This represents a large potential opportunity to help investors.”

In addition, flows into equity holdings were generally equal to those into bonds in May.

“The risk-off trade is gaining momentum, and this may be a good time for you to reset your clients’ risk-tolerance levels,” Shea shared.

In Europe especially, where some interest rates are in negative territory, “There are new opportunities … to help clients avoid negative yields on cash,” the executive noted.

As for regulation, the Dodd-Frank reforms are estimated to be costing the industry about $34 billion a year. Shea urged advisors to “move beyond talking about regulation as an industry burden and explain its impact on investors … and future economic growth.”

Also, advisors, RIAs and broker-dealers can and should work constructively with regulators. “It’s good for us to change our tune.”

Likewise with technology, the BNY executive says it’s time to further integrate technology into the advice business or be “disrupted,”  like the newspaper, taxi, hotel and other industries.

“Speak to these challenges, share your optimism and embrace the future,” Shea concluded. “And take Condeleeza Rice’s advice – be a realistic optimist.”


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