By Brian McLaughlin, Redtail CEO
Morgan Stanley officially announced it was withdrawing from the Broker Protocol on Monday morning, the day before Halloween. The frenzy of news outlets covering the development and the scramble of legal and regulatory experts to understand and brief clients on this very significant development, was tangible. Inadvertently, perhaps subliminally, there was a message within a message, owed to the timing. Perhaps Morgan Stanley wanted the independent resistered investment advisor and broker-dealer crowd to quake in their boots—but more likely, it is they who are afraid.
The conventional wisdom at the moment says that others, including UBS and Merrill Lynch, will follow suit and that wirehouse advisors should be worried. Now it will be much harder to leave and start a business in the independent channel. The gloves are off, so to speak, even though the wirehouses were the ones to put them on themselves in 2004. While some might view this as perilous to the growth streak the independent channel has enjoyed for over a decade and a half, we find it symbolic of something else.
In 2004, the independent landscape was very different from today, as independent firms were smaller and there were fewer and less robust options available to develop a firm’s infrastructure. Our theory on this change—which should not surprise anyone—is that technology played a leading role. Financial technology has given independent firms more power of choice regarding investment management, portfolio accounting and reporting, Customer relations management platforms, regulatory compliance oversight, risk assessment, and more. Each of these key considerations in an advisor’s business has not only been vastly improved in terms of the value they provide, but the sheer number of choices an advisor can make regarding each one, are myriad.
The thing that makes the independent channel so strong is simply its dedication to being fiercely independent. Because the choices and technological advancements have never been greater, the allure will not diminish anytime soon. In fact, it will only strengthen—and it’s no siren song. Advisors are not lured to the entrepreneurial landscape of wealth management only to be let down by what they find here. They cross the bridge and marvel at all the decisions they can make, and the power of the tools they choose to serve clients in the way they feel is best. As fiduciaries, they are free to put their clients’ interests first without input from their institutional masters.
Legal bills are sure to rise and attorneys are sharpening their swords. Some advisors may pause or set aside their dreams to run their own businesses, but some will push through—and they will be the toughest, brightest, most driven advisors.
The independent landscape will continue to get better because that is its hallmark. Our respective companies work with thousands of advisors every day. We know how driven they are and their competitive nature. They have been competing against big international wirehouse brands forever. This will not change and we will not adjust our approach to keeping advisors nimble, and armed with the best fintech available.
In the independent advisory community, we can integrate, innovate and find solutions that fit the needs of completely unique, energized and exceptional advisors. When we encounter a roadblock, or get a request for a new functionality, we jump at the chance to improve, to augment, to enhance. We partner with other technologies, sometimes even competitors if it means doing right by the advisor.
This highly charged environment has grown and thrived for well over a decade, it's true—and breakaways have been a nice complement to that growth. But let’s not forget that even if the flow of teams into the independent landscape were to dry up completely, there’s still a huge community who started here, and intend to grow and thrive here regardless.
So, if the dominoes fall, and more wirehouses withdraw from the Broker Protocol, that would be a shame. But we will welcome those who find a way to join us. We will continue to develop amazing technology that empowers advisors to help improve their clients’ lives. We veteran technology providers aren’t going anywhere—and to the contrary we’re doubling down on the amazing potential that being independent offers to advisors. New tech companies are popping up at a blistering pace and advisors are innovating and developing digital solutions themselves! We look forward to partnering with them.
If the move by Morgan Stanley signals anything, it’s that we’re winning. The giants of finance are no longer scoffing at the independent advisory space as a tiny irritant. They are now alarmed and losing larger teams than ever before and at a faster pace. We’re proud that technology has been a catalyst and an underpinning of this movement. To those who might be more hesitant to make a move, we say: take your time, do it the right way, with the right support team—we’ll be waiting for you. And to those already here, you have our promise that we will continue to equip you with the tools you need to grow and succeed in this business. The best is yet to come.
Brian McLaughlin is the CEO of Redtail Technology.