Learning To Cope
I‚ve had it with all this Marine-style character building. Over the last 30 months, advisors and their clients have been thrown what seems like a lifetime‚s worth of tricky curveballs. Even editors have seen their fair share.
In the last month alone, I‚ve attended the Financial Advisor Symposium that our company, CFPN, produces in partnership with Intershow. Two days before the conference began on September 12, Attorney General John Ashcroft raised the terror alert level to the infamous orange code, his second-highest level. Despite all that, the conference was quite successful.
Then at the end of September, I flew to New Orleans for the Financial Planning Association‚s annual Success Forum. Although that conference postdated one hurricane by a few days and preceded another by four days, the FPA pulled it off with its usual skill. And this week, I and many others in the business plan to attend Schwab Institutional‚s annual conference in Washington, D.C., an area engulfed by a serial sniper. Bad news is getting old.
I‚m not trying to create an impression that I have been unfairly singled out for a confluence of unrelated independent events in the last few months or years. Millions of American have been subjected to far worse circumstances than my own list of inconveniences. But for all of us, it‚s getting exhausting.
In the last 30 months, we‚ve all learned to cope with a world that is far from perfect and far from the world we remember from the late 1990s. Problems like terrorism that are global in scope serve to place other problems, like a bear market, in perspective.
In one respect, though, any editor who gets to cover folks like you is very lucky. According to Moss Adams‚ guru Mark Tibergien, financial advisors are the "firemen of our day." Tibergien‚s report on the financial health of most advisory practices is a mixed bag of crosscurrents and contradictions.
What is clear is that independent advisors have used the current bear market to dramatically increase their market share. That development undercuts the predictions of some analysts who said two or three years ago that once wirehouses and direct marketers built their own advisory platforms that resembled independent advisors‚ value proposition, competition would intensify and small independent advisors‚ businesses would suffer.
No doubt some small advisors‚ practices have suffered, and many have seen their profit margins get squeezed. But a large group of experienced advisors is enjoying top-line growth at a time when some wirehouses are seeing revenues from retail brokerages fall by 20% or 30%.
A stress test like the last 30 months spotlights many of the strengths and weaknesses of different business models. Although advisors may not be the world‚s best business managers, they possess remarkable staying power at the very least. Look at the issue another way. This month I had the opportunity to interview Deborah McWhinney, president of Schwab Institutional. Advisors have understandable concerns about what Schwab‚s retail arm is up to, but they also should look at the interview on page 125 to see where Schwab is putting its personnel resources. Since early 2000, Schwab has laid off 37% of its staff. Yet McWhinney notes that the headcount of Schwab Institutional has remained unchanged since she started there in 2000.
The guess here is that when the financial services industry as a whole and the markets in particular snap out of their funk, the top firms will continue to gain share. But over the long term, advisory profession analysts like Tibergien and Mark Hurley have a point. To sustain their competitive advantage, advisors must start looking at what they do as a business, not a practice.