Recently, the independent advisory world has been abuzz with the news of Curian Capital’s unexpected decision to close shop. In my 30 years in financial services, I have never seen such an abrupt decision to stop serving clients. While as an outsider it is impossible to understand all the factors underlying this decision, watching this unfold reminded me how important it is for investors to have trust and confidence in our industry. Without that trust and confidence, investors will not save and invest, which means they won’t meet their financial goals and dreams.
While we’re all in business, putting financial returns ahead of client needs is not only wrong, it is just bad business. Creating value in our industry is directly linked to helping investors. That means helping investors think through their goals. This is hard work for both advisors and investors. Only after understanding goals and risk should advisors recommend a portfolio. For advisors, making money must never be part of the portfolio construction process.
When we back up our promise to investors with dedicated service, excellence in execution and integrity in every decision we make, together, as an industry, we can win the hearts and minds of investors – real people who are also our friends, neighbors and family members. This is what we must do to build trust and confidence.
I feel the burden of that responsibility and take it seriously every day. I know that most firms and CEOs in our industry feel the same way.
Scale Is Critical
Part of that responsibility for firms like ours is to create the scale necessary to provide the assistance advisors and their clients need in critical areas such as portfolio construction, technology, practice management and deep field support. Firms that aren’t able to accelerate resources in all of these areas are finding that they cannot survive.
The TAMP landscape has grown significantly over the past five years both in total size and in the number of participating firms. That is because advisors are moving to fees and looking for firms that can help them deliver great portfolios and tools to their clients. The best advisors spend most of their time finding new clients, working with existing clients and building their firms. They know that manager due diligence, portfolio construction, technology selection and integration, are better left to firms with the scale and resources that can do it really well.
While the list of platforms is long, we find that there is a short list of viable TAMPs who have achieved scale. The long list of smaller providers is comprised of many firms pursuing multiple business models; they may be offering model portfolios and also delivering full-service platform capabilities or they may be more narrowly focused. Whatever their business strategies, most of these firms, are finding it difficult to invest across all areas required to thrive as a TAMP.
What it takes to survive and thrive has certainly shifted. The world is changing. The aging of baby boomers and the rise of millennials that embrace technology are just examples.
A second big change is the way investors should invest. Manager selection and portfolio construction require that advisors do much more work than ever before to understand what works best for each client. Frankly, it takes scale to do that work just as it takes scale to invest in technology.
These changes and many others have put tremendous pressure on advisors and firms that support them, but they also present opportunity. Advisors need to invest in technology, or find robust firms that are already investing in portfolio management tools, a range of diverse investment strategies and the services to support them as their partners.
Give the People What They Want
Investors want to see their portfolios and they want them presented simply. They want to be able to understand and digest the data quickly. They’re used to seeing their bank accounts and paying bills online on any device at any time. They want that same accessibility for their investments. This idea of data visualization, of making the data absolutely pop and tell a story, should be a goal of all firms serving advisors.
Serving investors is always job No. 1 for advisors, but they also need to manage their business. We find that advisors are looking for best practices in organizing their back-offices, hiring staff and junior advisors, and marketing their firms to accelerate growth. Providing answers to these challenges takes time, people, resources and commitment.
More than ever, investors need help and the fee-based independent advice channel continues to provide extraordinary service to investors. Firms like ours are leading the industry towards responding to investor needs with goal-oriented investment and planning tools, and new ways for advisors to collaborate with clients through technology. These innovations drive trust between advisors and the investors they serve. I look forward to being part of the next wave of this trajectory, creating trust and confidence so that investors can meet their lifelong goals.
Charles Goldman is president and CEO of AssetMark, Inc., an independent strategic provider of innovative investment and consulting solutions serving financial advisors.