In my blog entitled “The Three Mega-Trends in the Wealth Management Business”, I made the case that three important things need to happen in this industry:
- The Business Needs to Grow Up—the industry needs to move from a manipulative product sales model to a real professional services model;
- Narrative Before Numbers—clients’ stories need to be heard and understood before the charts and graphs start flying; and
- The Need for a New Culture—the industry is rife with conflicts of interest that need to be cleaned up.
We are going to unpack #1 “The Business Needs to Grow Up” in this article.
The origins of the brokerage business in America started in the late 1800’s when railroads were being built all over the country (1). Brokerage houses hired salesmen to sell railroad stocks and bonds to investors to finance the railroads. The first modern day mutual fund was started in America in 1924 (2). Until the dawn of the internet only a couple of decades ago, most of the best research on stocks, bonds and mutual funds could be found at those same big brokerage firms. Those firms’ brokers would call and sell products to their customers based primarily on their superior knowledge.
In 1930, the life expectancy of the average American was 59.7 years. By 2010, that number had grown to 78.7 (3). The idea of retirement is a relatively new concept. Therefore, the rise of the wealth management industry is also relatively new. The industry is struggling with growing pains as it attempts to make the transition from selling products to representing clients.
I started my career in one of the “Big 8” public accounting firms. I still maintain my CPA license today and every other year I am required to take four hours of ethics training where the importance of independence is reiterated and ingrained in my head. That attitude is pervasive (thank goodness) in that profession. It is time for the wealth management business to grow up.
There is no professional designation like the CPA in the wealth management business. The closest thing to it is the Certified Financial Planner (CFP) designation, but that does not require the certificate holder to represent the client 100% of the time. (For more on who your advisor really represents, click here).
The best thing a client can do at this point in the industry’s history is to hire a financial advisor that works for a Registered Investment Advisor (RIA). Only advisors that work for RIA-only firms can say that they represent clients 100% of the time.
Our firm, Archetype Wealth Partners, spent 25 years at the largest global wealth management companies. We left to start our own RIA so that we could fulfill our calling to help clients and their families thrive across multiple generations. We are trying to do our part to help the industry grow up so that clients are served in a more professional manner.
Jeff Thomas is the Founder/CEO of Archetype Wealth Partners. He has assembled an amazing team to provide an open architecture, fee-only (fiduciary) platform that offers a wide variety of investment choice to clients. Archetype exists to help families thrive across generations.
Disclaimer: Our intent in providing this material is purely for informational purposes, as of the date hereof, and may be subject to change without notice. This article does not intend to constitute accounting, legal, tax, or other professional advice. Visitors and readers should not act upon the content or information found here without first seeking appropriate advice from a trusted accountant, financial planner, lawyer or other professional.