On Thursday July 11th CFA Society New York hosted Independent & Wirehouse Business Models. The forum was part of the event series organized by the Private Wealth Management thought leadership group at CFANY.

The forum offered an objective, candid, and illuminating dialogue around a subject top of mind for many working in wealth management: the pros, cons, and future for the industry among various financial advisor affiliation models.  We were joined by an impressive group of domain experts sharing perspectives into the wealth management ecosystem

Management Consultants Panel

  • Charles Smith, Head of Product Innovation, Wealth & Asset Management Advisory, Ernst & Young
  • William Trout, Head of Wealth and Asset Management, Celent, a division of Oliver Wyman
  • Greg O’Gara, Senior Analyst, Wealth Management, Aite Group

Executives Panel

Louis Diamond, Executive Vice President, Diamond Consultants moderated the panel discussions with the aim of creating a neutral arena for dialogue. The evening also presented a unique opportunity to network among peers and industry leaders. 

Here are some of the key takeaways from the conversation:

1. Disruptive undercurrents will impact all channels in the industry, none can rest on their laurels.

Will Trout opened the evening’s discussion with a passage from Ernest Hemingway’s The Sun Also Rises, and spoke to the numerous undercurrents expected to re-shape the business of financial advice looking ahead. Specifically, an arms race for technology – along with secular shifts in regulation, client expectations, and generational demographics.

“Change is often imperceptible, and it’s only when you start to notice that you realize that things have dramatically been altered” he said.

Abby Salameh similarly expressed the view of an increasing pace of transformation across the industry in the next 5-10 years impacting financial advisors in all affiliation models. “We need to be on the forefront of adopting and evolving to what clients really want and how they want to be served” she remarked.

Key distinctions that once delineated one channel from the next have become increasingly blurry over the course of time, driven by a shift away from transactional brokerage and the proliferation of fee based advisory services.

Independent brokerages have taken on the appearance of predominantly fee-based RIAs, and wirehouse and integrated banks are blending and encroaching toward the independent space.

2. Succession planning needs are pervasive, but smooth and effective transitions are easier said than done.

Abby Salameh shared that at her organization succession planning is top of mind, and of ongoing importance as an acquirer in the space. However, moving forward with and completing transitions is neither easy nor short-lived. Impediments arise from both scarcity of next generation professionals stepping in, as well as the preparedness of founders and older principals to step away.

Phil Fiore noted that the Procyon Partners team has sought to be conscious and prepared for succession planning challenges that are commonplace for wealth advisors in all segments of the industry. “We do have a bench. We have 5 founders and one of them is in their 30s. There are a lot of great businesses that are dealing with the succession plan head-on,” said Fiore. He remarked that many wealth management principals are seeking to partner with Procyon and other larger and scaled wealth management firms for a glidepath runway to retire and transition clients into the stewardship of a capable new advisory team.

Re-orienting from the solo individual to a team emphasis is vital not just for ownership transition and business sustainability, but can create a new trajectory for expansion remarked Mark Tibergien. “It is no longer about individual’s with books, it’s about enterprises with teams. The successful advisory firms that are enduring, that will last for 100 years have actually begun to look at how they build their business beyond the individual and more about the continuity of the practice. Rather than thinking of succession as the end of life, they are thinking of succession as a growth strategy.”

3. Aligning value delivered to client needs and expectations requires re-thinking pricing and engrained norms of service and delivery models.

Over the course of time the industry broadly has migrated the focus of it’s services offering from investment forward, to planning forward, and now experience forward.

Today expanded value beyond portfolio management relies on a broader spectrum of services dependent on the lifecycle of the client. Pricing structures today that are tied to AUM asset levels disproportionately reflect value proposition residing in asset management.

Asked to assess if digital robo advisory offerings pose an existential threat to traditional human financial advisors Charles Smith indicated that wealth advisory firms in all channels of the industry are mostly aiming for robo and digital services to augment, not replace the human advisor.

“Firms today are trying to enhance advice to incorporate more than just investments.” he said. Advisors are safe from robo advisors so long as they are using other technology, tools, and services at their disposal to make that offer more complete.

Is the future of our industry Independent or Wirehouse? 

The answer may not be the one you expect.

Thanks again to all of our speakers and panelists, as well as our event support volunteers: Michael Sinodinos, Lisa Brignoni, and Joan Koutsky

And tremendous thank you to Vanessa Ceballos and Catherine Maliha for running the show as maestros on our CFANY events team.