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January 24, 2017 at 07:11 AM
Executives speaking Monday at FSI OneVoice in San Francisco say their brokerage operations have changed in preparation for the Department of Labor’s fiduciary rule, and — with it or without — commission-based business models are on their way out.
“There’s no going back,” Wayne Talleur, president of Madison Avenue Securities, said before a crowd of about 700 attendees at the conference’s opening sessions. “We’ve evolved more in the last 18 months than we have over our [entire] existence.”
The regulatory push forced advisors with Madison Avenue “to look very hard at their businesses,” Talleur says. For all of them, the DOL drive requires advisors to see how they can best serve clients going forward; in some cases, this has meant finding a successor to take over a practice if an advisor “doesn’t want to make a turn.”
For advisors and broker-dealers alike, the executive explained, “The horse is out of the barn. DOL increases the costs of doing business, and this was true even before its final approval.”
While Madison Avenue “turned the ship as quickly as a small firm” in response to DOL, its advisors have seen an increase in the length of the sales cycle.”
To help the business adjust with this challenge, higher costs and other changes, Madison Avenue is “leveraging partnerships” with clearing and custody firms like Pershing and Fidelity, as well as with product sponsors, Talleur points out: “As we look at this, we decided we want to leverage beyond our internal talent.”
The firm held 25 separate meetings, he adds, investing “a ton of time and resources to it.”
‘Mother of Invention’
“Even if [the DOL rule] is delayed, we have entered into the fiduciary era,” said Valerie Brown, executive chairwoman of the Advisor Group, which includes several independent broker-dealers with a total of 5,000 affiliated advisors.
“As the saying goes, ‘Necessity is the mother of invention.’ The challenges presented by the rule caused us all to be extremely creative to help our independent firms better serve mainstream America,” Brown explained.
