Whether financial advisors like it or not, the advice they provide should be their central value proposition. Advisors who focus solely on investment product sales without providing valuable advice backed by comprehensive needs analysis will become extinct. This is no longer just a corporate mandate, but a client-driven one. Only a couple of years ago, prior to the financial crisis, advisors who refused to embrace the new advice-driven model might have received a slap on the wrist from their manager for failing to complete their required number of financial plans. Today, their loss is likely to be more tangible, through declining revenues.
I’m feeling sad today. In fact, I lay awake this morning reflecting on dozens of conversations I’ve had with compliance officers at asset managers, hedge funds, and broker/dealers. It’s difficult not to empathize. I don’t recall ever feeling this way after interviews in other functional areas…
Here are people with a job that is growing in range and responsibilities, in effect expanding into operational risk, yet they have few to no resources. Compliance is considered a cost center — in and of itself a death knoll in a time of cutbacks — not that compliance departments had a budget before the crisis. Instead, the compliance officer must build a business case and go hat in hand to management, timing a good day of course. Few are optimistic.
As the financial crisis and its aftershocks roll on, vigorous discussion continues about how America’s retirees, whose needs are more and more met by defined contribution plans like 401(k)s and 403(b)s, will be able to fund their retirement. Considerable hopes have been pinned on encouraging retirees to roll their savings into annuities.