“Eighty percent of advisors underperform their own indices [but] I’ve never met one of these individuals. They’re quick to tell me, ‘No, no, no—I outperform the benchmark,’” with a “myriad of reasons why the statistics right in front of them are completely erroneous.”
Firms will face some difficult conversations when they confront advisors who are not performing well.
Transamerica approached a group of its higher producers, Chuang said. “Some were humbled by it. … They all thought they did a great job and realized they hadn’t.” Other advisors remained in denial.
Moving to goals-based assessments of performance, where progress is measured against financial goals instead of a benchmark, could further hide the fact that reps as portfolio managers may be adding little value, Bryan said.
Bill Crager, the president of Envestnet, the TAMP used by many B-Ds, said his firm is developing tools so firms can do peer-group analyses, and find out which reps are doing well and which ones are not.
“They’re not all bad, and not all good,” Crager said. “There will be areas where [reps] really make a contribution, and other areas where they do stupid things.”
Problems might be found within small accounts, riskier models, overall allocation and weightings, he said.
“Small tweaks can be made, and it improves the process,” Crager told B-D execs at the conference. And “advisors need to embrace [the analysis], learn from it and get better.”