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June 07, 2017 at 12:28 PM
I recently asked a friend who has run a successful independent financial advisory practice for the past two decades how he felt about the continued regulatory pressures and potential for further industry consolidation.
His response: “The regulatory environment is always in a state of change, and that’s an issue that the right kinds of resources can help many advisors address. Consolidation is a different story, because that has the potential to change the culture of your broker-dealer. And culture matters a lot more than many of the so-called industry experts might think.”
There’s certainly no question that in recent years industry analysts have tended to focus on practical points of differentiation between independent broker-dealers: the quality of advisor-facing platforms, the effectiveness of technology tools, and the variety and cost of financial product selections.
While these are obviously important considerations for any independent advisor, the culture cultivated by the broker-dealer is the one component that can either drive growth or hold it back.
The following are the service-based cultural drivers that independent advisors should consider very carefully when comparing independent broker-dealer platforms:
1. Does the firm go beyond “lip service” when it comes to independence?
Independent advisors not only want to have full control over the fate of their businesses, they also want to be part of a home office culture in which upholding independence is an inherent part of a firm’s DNA. And while nearly every independent broker-dealer claims to value independence, that doesn’t always happen in practice.
Not all firms, for instance, provide dedicated support and coaching in a range of critical areas that tend to drive the long-term success of an independent advisor’s business, including practice management resources and access to specialists whose sole job is to help you better utilize the technology available to you. Nor do they empower advisors to make a handful of important choices that speak to the essence of what it means to be independent – including something as crucial as selecting the right business model for their practice.
Without these types of support programs or internal mores in place, independence is just theory.
2. Is the firm truly candid with its advisors?
Nothing is more crucial to a successful relationship than trust. Yet over the past decade, the industry as a whole has witnessed a trend toward national conferences for advisors becoming ‘pep rallies’ rather than forums where a meaningful exchange of ideas and best practices can take place.
