Why Indie Advisors Benefit From Indie Advice

When I ran into another advisory business consultant I’ve known for years,  he said he’s not working directly with advisors anymore. Instead, he’s working with institutions that work with advisors.

The reason? “Advisory firm owners won’t pay for consulting,” he said. “You can’t beat the institutions, so you have to join them.”

While this isn’t my experience, I frequently have heard this complaint from other consultants. And I have to admit that I find it a disturbing trend in the industry. Here’s why.

Independent advisors are well aware that retail investors face many conflicts of interest in the financial services industry. Avoiding or mitigating these conflicts for their clients is the foundation upon which the independent advisory industry is built.

Advisors often overlook the conflicts they face in the industry, that is, in their relationships with affiliated institutions.

I’m not saying that these companies and their leaders are bad folks — they certainly aren’t. But they are “businesses.” And as businesses, they have their own agendas for generating revenues and profits for their shareholders.

Most independent advisors do a good job of helping their clients navigate these conflicts. However, they don’t always do such a good job of it on their own behalf.

This brings me to the issue of business consultants working “with” these institutions to “help” affiliated independent advisory firms. Just as institutions often have conflicts with investors’ interests — typically over product costs and loads — they also have conflicts with their affiliated advisors.

These conflicts can be harder to spot. One issue is institutions that help advisory firms to “grow.”

Obviously, the bigger the advisory firm, the more business for the institution. Consequently, some institutions go to great lengths to reward their “big producers” and other advisors who recommend preferred products and services.