Investment firms are kidding themselves if they think consumers will flock back to advisors simply because the markets are doing well, according to Chip Roame, head of Tiburon Strategic Advisors.
“Consumers don’t like your industry and that won’t [change] over the long term,” Roame said today at the Tiburon CEO Summit in San Francisco.

“It’s naive to believe there won’t be a new scandal in the next six months” that will once again turn off the public to Wall Street, he added.

In fact, Roame believes the next scandal may be losses that investors are almost sure to suffer in bonds.

“They’re going to say you didn’t explain” how higher interest rates will cause bonds to lose value, he said, so “I’d be real loud about” issuing warnings.

Retirement-income and tactical strategies are regarded as strong trends in the investment industry, but “tactical doesn’t work, folks,” Roame said. “There’s a lot of nice theory [behind it], but not a lot of evidence that it works.”

Roame also warned the executives at his conference against loading up on alternative investments.

“Alternatives are the most overhyped thing,” he said.

“My advice: Invest in taxi medallions,” he added jokingly, noting that New York City taxi permits had increased in value more than financial assets since the crisis.

Product sponsors will increasingly suffer pricing pressure as distribution channels exert more market power, Roame said.

But wealth managers, the biggest distribution channel, may themselves face more pricing pressure.

“Most [investors] are paying premium prices for a commodity service,” said Steve Lockshin, chairman of Convergent Wealth Advisors, during a panel presentation.

He criticized advisors who rely on salesmanship to maintain relationships without adding enough value. “As soon as [the level] of service and price comes out [to the client], the rug will be pulled out from under us faster than you think,” Lockshin said.

Upstart online advisory firms are offering advice for 15 basis points, or even for free on the first tier of assets, he said, which could reduce margins for wealth managers.

“Simple investment advice is becoming commoditized” with technology, agreed Michelle Watson, chief investment officer at First Republic Investment Management.

“What that means is, we’re going to have to be more customized [and find] ways to resonate with clients,” she said, such as “investing in things that make a difference” in society.