Cannon Financial Institute

Mega Trends We Cannot Ignore #2


Broker Dealer consolidation is not going to slow down nor will the movement of advisors to the independent RIA model. Therefore even the biggest BDs must find ways to compete with the breakaway RIA movement and tell their value-add story better.  It is no small feat for Advisors to start their own business, and the Clearing firms are doing an excellent job of paving the way.

To cloud the landscape even further, emerging “Mega RIAs” are, in effect, now operating as the BD platform; choosing technology, providing services, creating trading platforms, delivering compliance infrastructure and promoting the big difference in the regulatory authority overseeing them.

A key competency for the IBD is helping Advisors evaluate the challenges of replicating the IBD’s resources and build an appreciation for the real value they provide.

The conflicted CFP/FPA designation challenge around what constitutes a fee only planner aside, BDs need to leverage their back office and service operations by delivering to their Advisors under the corporate RIA a more robust and accommodating fee for service capability than most currently allow.

The ability to craft fee for service packages, a la carte menus and the general unbundling of service payment options will be key to helping Advisors meet the new value propositions and business models in our industry.   Helping create fee packages that are product neutral and can accommodate for both wealth planning services and commissions reflects the new age of meeting clients where they prefer to be with an And & Both approach tailored to what the client wants versus what the Advisor requires.

Unbundling fees will ultimately eliminate the fight over whose business model (fee based planning or product transaction fees) is “the best” for a client.  In the end, one must earn the right to serve the client, and the advisor and client negotiating the way the advisor is compensated for their time and level of effort using a menu, creates transparency and is easier for both parties to navigate.  It will also make the advisor’s practice easier to manage.  As they set their pricing menu they will need to validate each elements level of effort and match that off against fees.  With this approach, the advisor can truly understand relationship profitability.  Setting one’s price for services and then allowing the client to choose which services to use, means each party receives what they need in order for fair exchange to occur.  For the Advisor, they can now match capacity to revenues and using real data they are able to analyze many things including whether to add staff.  For the client, it removes the suspicion that better deals are available or they are paying for some services they don’t need.  This approach places all the players, the BD, the clearing firm and the Advisor in alignment with the market and each client.

As the BD works hard to align itself with the Advisor in order to retain them, they must make sure they can support the Advisor’s alignment with their client’s preferences.  Recognition that most Advisors have multiple customer segments within their practice, each with different general preferences, requires IBDs and Advisor platforms to be able to more easily craft different client experiences.  That means the technology platform must proactively manage multiple experiences on behalf of the Advisor, a reversal of most approaches where Advisors try to shoe horn every client into the same experience because they can only build and remember one set of workflows.  Solving for the ability to match the client experience, product and service set and appropriate pricing will help both the BD and the Advisor to beat back competitive alternatives that are emerging with these similar capabilities.

In our next installment of 6 Mega Trends We Cannot Ignore, we will explore how the Wealth Management Team is becoming the business model for serving the complicated issues of the high and ultra high net worth, and how firms can support these teams.

Please don’t hesitate to comment, post your thoughts, pass along this information, or call to discuss your situation and what response might create an advantage for you!

Want to Talk? Let’s Chat.

Press Launch Live Chat to chat online or give us a call at 706.353.3346.

Launch live chat