At the 2016 Broker-Dealer of the Year roundtable, the leaders’ discussion turned to a chicken-egg dilemma: Should BDs build and implement technology based on what their reps are asking for, or do they have to look ahead and try to determine what they’re going to need in the future?
Lon Dolber, American Portfolios, Division III: You sometimes have to step out and say, “What is the advisor going to need?” You’ve got to look forward. I do believe I see some changes in there. We built our platforms so that it doesn’t make a difference where the asset’s held.
At some point, it won’t require transferring the asset to our institution, to our relationship here or our relationship there. I’d like to be the Apple of financial services where effectively anybody can plug into my network. They don’t even have to be registered with me.
[Advisors will] plug into the network, [and] be able to illustrate, propose, model, bill, execute, invoice, endtoend. “You want to be in my network? Yeah, you can put your products in my network.”
If we really start thinking what’s happening to financial service, and we think of what’s happening to the internet of everything, we’re so tied to this thinking about transferring accounts to our brokerdealer, or transferring it to our relationship with advisory, [but] look what [Steve] Jobs did with the record industry. They were the manufacturers of the records. He said, “Hey, I’m going to have people buy those records instead of stealing them, because they’ll pay $0.99, but they’re not buying the whole album.”
Right now we’re building a network for our advisors and for those who are affiliated with us, but I do see a point down the road where [it doesn’t] make a difference if they’re affiliated with you.
Green: In your analogy to the Internet of Things, it doesn’t matter, once your refrigerator or your microwave or your security system is on the network, where you plug into the network.
Dolber: The challenge, of course, is to calculate where you make your money with that, but first things first. You can’t have a network without having a client portal.
When I think about client portal, I don’t think about what most brokerdealers have right now. I’m talking about a real client portal, which the banks have. The client portal that TD [Ameritrade] has because they deal directly with the public.
The independent brokerdealer that has not really built true handshake portals with the client, where the client is logging in the way a broker logs in to a portal, and [is] directed to services, and they see things in a unified, secure way.
Schwartz: Historically, it wasn’t done because it was the rep’s client; [they] didn’t want them dealing directly with us. The rep would say, “Why are you selling him services that I don’t even know why you’re selling them to them?”
Obviously, with a robo client portal, that’s why we’re trying to figure out with the advisors how they stay in the loop so nothing happens without them being aware of it. It’s a valueadd to them, not a competition.
DeVito: What’s going to allow JP[Morgan] or any other firm [to give] you access to their accounts when there’s a rep on that side? What about the regulatory side of it where you need to be registered to do it? Unless you’re going to go completely RIA, and then they’re just a trusted advisor on that side of the business only. Right now there’s too many things in your way to do that.
Dolber: It’s going to take some regulatory change. I’ll give an example: Your medical records. Every time I go to the doctor they make me fill out another bloody thing. I’m saying, “Don’t you have this stuff online?” HIPAA rules have to be changed.
That’s why you have Yodlee and CashEdge because the only way you can get that data is by having the institution for the advisor log in as the client and screen scrape the data.
DeVito: Not only will [you need] regulatory change, you’re going to need regulatory complete reversal and change.
Green: In what way?
DeVito: They’re adding more regulations for our own clients, so they’re tightening up all the regulations for what you have control over. Imagine them now saying [I have] to give up control of that asset theoretically to a trusted advisor who’s not with you. Why would I take the risk when I have my advisor already in it? Who’s going to be the supervisor? Who’s going to be the DOL?
Dolber: Where the asset is held is immaterial.
DeVito: Not regulatorily. We won’t have one rep sharing with another rep. If your rep does and it’s a joint account, you’re responsible for what my rep’s doing with the account and viceversa. That’s risky.
Schwartz: It’s certainly complicated, with privacy rules and all that.
Dolber: I met an executive from Morgan Stanley that said to me in some cases, they will allow an outside advisor to get data. It’s starting to happen. I wouldn’t say it’s not going to happen. As far as I’m concerned, whoever the advisor is that’s directing their transactions inevitably will be held responsible, but that’s down the road.