LAS VEGAS—If the Royal Alliance National Education Conference is any indication, independents are thinking one thing: The time to strike at the wirehouses is now.
The annual conference, held this year in the MGM Grand in Las Vegas, welcomed nearly 1,000 financial planners affiliated with Royal Alliance, an independent broker/dealer subsidiary of AIG. The message, repeated relentlessly in the opening session, was that the Wall Street wirehouses are wobbling in the wake of the historic settlement with New York Attorney General Eliot Spitzer—which fined 10 Wall Street firms $1.4 billion (with a tide of retail investor arbitration cases looming).
For independents like Royal Alliance, it is an unprecedented opportunity for smaller broker/dealers, more involved in the financial planning business than the stock-trading business, to win the hearts (and wallets) of millions of clients. "The only firewall wirehouses care about is the one between them and an indictment," said Royal Alliance president and CEO Mark Goldberg, in his address to his employees and reps on Thursday.
He noted that 64 percent of Royal Alliance’s new clients come directly from the wirehouses and expected that to grow "tenfold" in the coming months. Even those not fingered in the settlement were not spared; Goldberg saved some of his strongest vitriol for Charles Schwab & Co., which he accused of pretending to be pure while slashing its own employees’ 401(k) programs.
"The wirehouses just don’t care about clients," he said. "For that reason, the game is over. We’ve won. We’re in position to collect the rewards of this victory for some time."
Royal Alliance has grown considerably in the past year, swelling to 2,800 reps at the end of 2002, a 17 percent increase since the hot-dot days of 2000. According to Goldberg, the firm opened 59,000 accounts in 2002. Also, its Vision 2020 program, an easy-to-understand software program introduced at last year’s National Education Conference to help advisors organize their client accounts and bring in new ones, has added more than $1 billion assets under management.
Goldberg scoffed at wirehouses’ attempts to "transform" themselves from stock pickers into financial planners, saying it’s too late to pretend. "It’s amazing to me how much the wirehouses just don’t get financial planning," he said. "This is our field, and our game, and we are winning."
Jay Wintroub, president of AIG/SunAmerica, emphasized that Royal Alliance will remain its own entity and has not merged with any other AIG affiliates (AIG has five others). There was some speculation that when AIG consolidated management positions some months ago that the broker/dealers would eventually be merged into one unit, all taking the AIG name.
The session kicked off four days in Las Vegas for the Royal Alliance reps, with conferences discussing sales tactics, 529 plans, wealth management services and "creative retirement strategies," spliced with golf outings and the unique distractions of Sin City.
Goldberg acknowledged that even despite Royal Alliance’s leaps in the last year, 2002 was a wretched one for investors, saying he was just "glad it was over."
"Everything you do will be illuminated by your performance of the past three years," he said. "You’ve delivered 13 straight quarters of bad news. The future will be based on the trust you’ve developed. The hard part is over; our time is now."