Registered Rep. recently caught up with Debby McWhinney and spoke with her about the rivalry between the registered investment advisor (RIA) firms that Schwab caters to and Wall Street wirehouses. Here is an excerpt:
Registered Rep.: With a lot of the big wirehouses copying the RIA model and shifting to fee-based wealth management, how will RIAs maintain their edge?
Debbie McWhinney: I think that if I were a Merrill Lynch or a Smith Barney, I would make the moves that they have. But one thing that [RIA] advisors have that you can't invent overnight is a fully open platform. The full-commission brokers can have some people with more openness than others and different payout rates, but they can't go to 100 percent.
RR: Why not?
DM: They can make inroads. But to be an RIA, the standard is that you must do what's right for the investor. Advisors say, “Here's what we do, here's what we charge, we have fiduciary responsibility to do what's best for you and the only way we get paid is to have you make that money.” And that's difficult to duplicate. It's the psychology of the investor that matters, because they want trust, experience, a customized solution and they want results.
RR: But will the investor really know the difference?
DM: I believe that the next seven years are going to predict that. More and more, the wealthy are finding their financial advisors through personal referrals. The numbers show that people who are 55 to 70 have one kind of need for a major brand, and the next generation has less of a need for a major brand.
We have to market ourselves, and make smart assumptions not to lose our advantage. But will Merrill Lynch and Smith Barney be bigger than they are today? Yes. They have to be. It's just a matter of where the market share will be and where generational opinion has shifted.