A study published in October by Cerulli Associates, a Boston-based research and consulting firm, found that only 7% of financial advisory practices were suited to do their own research and portfolio construction/management. Yet, according to the same study, 62% of advisors are in fact performing these functions on behalf of their clients. We do not necessarily agree with the assertion and prefer to frame this conversation in the context of fiduciary responsibility and best practice.
The Impact on Advisors (Does Free = Free?)
A frequent topic in our writing is the changing landscape for advisors and investors in terms of the cost of doing business and the impact of technology. With so much rapid change taking place in the industry, there has not been a shortage of material. In fact, it was only a few years ago that things like trading commissions were a major consideration when developing investment strategies. What are now mainstream approaches, like passive investing, robo-advising, and low to no commissions, were once either obscure or did not exist. We are now simultaneously experiencing peak passive and a new low in the race to the bottom on fees.
At Blueprint, we spend a lot of time articulating the ‘why’ behind our systematic, process-driven investment approach. Our communications with advisors frequently emphasize behavioral finance because we believe that having a transparent process and educating our partners about exactly what to expect leads to better investment outcomes for their clients. Today’s note focuses on another, equally emphasized subject of our writings: advisor practice management. Please read on.
Like the networks in the summertime who replay their episodes to recycle good material, I thought a revisit of the much discussed and maligned DOL Fiduciary Rule was in order due to its recent vacating by the 5th Circuit Court in New Orleans. With or without the rule, it is time for the industry to step up!
Back in the dark ages when I started my career in banking, the pace of work and communication was entirely different. Imagine a world with no mail other than what came with a stamp on it or in an interoffice envelope (who remembers those?). Your phone messages came on a pink slip of paper and you dictated your memos. You could actually choose to leave your work at the office. Of course, the biggest change today is that you literally carry your office around in your pocket or a backpack. (Briefcases are gone as well.)