Change

 

We are hoping that 2021 will be a positive change from 2020. Our hope is that the independent wealth advisory business will change too. This week we will examine three areas that need to change. Ultimately it is your decision,  but the status quo isn’t working. The three major areas deserve your consideration. 

Business Model

The growth in SPACs is having an impact on all industries. The last round of SPACs didn’t work and attracted some shady characters. Hopefully this new round will work better. Many pundits are warning it could be an investment trap.  We will keep an eye on the typical traps.  Hopefully this time is different. The other area that is changing is the broker dealers. The brokerage firms are trying to attract young investors by speaking their language of free, offering fractional shares to decrease the cost of buying high priced stocks and finally offering these services through phone apps. Sounds like the firms are checking a lot of marketing boxes for Millennials.  Unfortunately, they have disregarded the old box for risk.  We will monitor what FINRA thinks. The other change has been the explosion of IPOs.  This change has also attracted institutional investors.  My thought is that the independent advisory business has grown enough to play with the bigger institutional kids. 

Recruiting 

Zoom and virtual conferences have changed the way we recruit.  There must be a better new way to recruit than the conflicted status quo. We have been introduced to a firm that approaches recruiting like a dating app. Their algorithm and fiduciary approach is a big improvement.  My recruiting experience shows that many established advisors and dating app clients consider themselves to be above average. That might have an impact on the matching algorithms for both solutions. My friend found her spouse on a dating site after skeptical concerns. We might try to find our next colleagues on this site. It seems to be worth a try. 

Compensation 

The industry’s  commission changes have reduced profit margins. The lower margins and the changes in recruiting bonuses has decreased our advisor compensation structure. Independent firms need reduce their expenses to offset possible compensation reductions. The first place to reduce will be office expenses.  Clients and their advisors are comfortable with Zoom calls and staying in their safer home offices. This should decrease expenses.  Hopefully independent firms will offset the reductions by maintaining advisor compensation.  An independent owner should do this, but don’t think large established firms with A grade downtown offices will keep their hands off advisor compensation. They never have in the past.  

2021 can be better for us all. Business changes, a vaccine and a meditative prayer can help.