How Banking’s Plight Creates Advisor Business

Financial Planners

The turmoil in the banking sector has provided positive momentum for Raymond James and financial advisers to several other companies, said Scott Curtis, president of Private Client Group.

The client is “concerned about his cash”, financial institution in trouble Curtis said moving to Raymond James, for example, said Monday that the company $2 trillion in advisory assets by 2030 About twice the current amount.

“We have seen some Advisor clients moving large amounts of cash. As we saw in 2008 and 2009, this is a sign of confidence in our brand…” he said. explained. “Everyone wants their business and investments to feel safe and trustworthy.”

Curtis outlined his take on the state of the advice business at Raymond James’ 2023 Elevate National Conference. After the presentation, he spoke with his ThinkAdvisor about the future of the advice business.

THINKADVISOR: You said on stage that Raymond James is committed to an advisor-centric model and has no intention of creating a direct-to-consumer strategy.

Scott Curtis: Well, first, let’s go back to the late 1990s when Scottrade and E-Trade first appeared. At the time, there was a big debate: Why should you work with a broker when you can do it all yourself for $20?

At the time, about 20% to 25% of people with $100,000 investable assets called themselves self-managed. Twenty-five years later, the technology landscape has become more robust, and the proportions have remained largely unchanged. As assets grow in size, their numbers actually decrease.

So here is the real point. We believe in the model of a client-leading, human-centered advisor, and we are committed to it.

And let’s be clear. Developing a consumer facing business is not an easy task. You need a lot of marketing money and ultimately have to decide whether to compete with your own advisors or do what we do and focus your energy and resources on supporting them. I have.

For us, this is a clear decision. Our focus is to serve advisors. Advisors are our clients and we have obligations and responsibilities to them. This is where we can compete the most.

Of course we Utilization of technology and evolve with the times. We offer more self-service capabilities for clients interested in handling specific transactions directly on their own.

For example depositing a check is something a client wants to do on their own and is comfortable doing on their own and we make it possible. A simple direct debit is the same but you manage the big picture However, the role of human advisors remains important when creating financial plans.

The same can be said for real estate planning. charitable donation, legacy plans, etc. While you could theoretically do all of this yourself as an individual consumer with the right technology, the human expertise an advisor brings to the table is essential. I’m not going to change direction.

Your colleague, Jodi Perry, spoke at a conference about the Department of Labor’s proposed rule on reclassifying independent contractors. Can you explain what is at stake for Raymond James and his independent advisory corps?

This is an important issue, and as such, we are pleased to welcome Jodi Perry, President of our Independent Contractors Division, to the Boards of organizations such as the Financial Services Association that oppose this development.

The Securities Industry and Financial Markets Association (SIFMA) and the Securities Association of America are also actively working on this issue. All of these groups strongly oppose anything that endangers the world. Independent Contractor Status of advisors who choose to do so as independent contractors.

We don’t know yet what will happen. Ultimately, assuming the worst, if an advisor registered with a broker-dealer and operating in an independent contractor capacity cannot continue to operate in such a manner, he probably has two main options. will be left

One is to effectively become a legal employee using some nuances. Raymond James has an option called Advisor Select. With this option, you basically pay your own expenses and choose the property yourself, but you are an employee and have access to the company’s benefits plan.

The Advisor Select approach is functionally very similar to an independent contractor. Let us help you with your accounting needs.

Importantly, this model is not for everyone and location is key. It works well in 49 states, but it doesn’t work as easily in California as it has its own local rules and regulations. Basically, California cannot deduct business-related expenses from an employee’s salary, making the model difficult.

A second option is to take a radically different route. If you are unable to become an independent contractor and maintain your registration with the Financial Industry Regulatory Authority (FINRA), you must withdraw your registration and become a commission-only advisor operating under a Registered Investment Advisor. maybe.

Financial professionals in these situations should roll up to another RIA, such as a corporate RIA. This is basically because it is FINRA’s oversight requirements that prevent these people from being able to maintain independent contractor status. It’s about to be.

Finally, what I can say today is that we continue to work on this. We thank the advisors for their participation. They sent thousands of letters to elected officials opposing the removal of their ability to remain broker-dealers or RIA-registered independent contractors.

Our profession is not at the center of the larger issues at the center of this particular policy debate, so we are optimistic that there will be carve-outs. However, I am not satisfied with this.

When you change gears and talk about disruption in the banking sector, does it make the job of hiring talent easier?

Yes, it has impacted the hiring opportunities we have.

And our advisors see equally significant opportunities. Frankly, their clients are worried about cash and many of them have seen their clients take cash sitting in these places. financial institution in trouble I will transfer the news to Raymond James.

I have seen some advisor clients move large sums of cash. As we saw in 2008 and 2009, this is a sign of confidence in our brand.

To be clear, this is not unique to Raymond James. Many of the biggest, too-too-fail organizations have also seen huge inflows in recent months.

Aside from that, yes, there is an advisory team looking for a new home, some of which are in discussion with us. And client awareness is important. Everyone wants their business and investments to feel safe and to be trusted.

Your question takes me back to 2008 and 2009. At the time, clients asked me how safe my investments were, Raymond James/?

That experience has allowed us to create very useful tools and resources that our clients approve of. Our employees can and do share these resources about how their investments and cash are protected here at Raymond James, which gives them a lot of peace of mind.

Can you talk about fee-based asset and revenue growth and how it compares to the brokerage business?

What’s interesting is that we’ve seen a long-term trend towards fee-based. Yes, but I think there is an open issue here. Than the overall growth rate?

I don’t think anyone really knows, but my gut tells me we’re approaching a point where fee-based and fee-based assets will grow at the same rate.

This is a logical result, as we know that not all client relationships are better with advisory accounts than with fee-based brokerage accounts.

For example, some of our high net worth clients have access to private equity opportunities and other unique investment opportunities offered exclusively in commission wrappers. While we promote the creation of both approaches, some of today’s great opportunities weren’t built as advice in nature.

Personally, I don’t think fee-based advisory assets will be 75% or 80% overall, as some predict. Fee-based assets are on the rise, but the growth rate is slowing relative to overall growth.

When you think of the topic of “retirement” and what Raymond James is doing to help Americans prepare for and enter retirement, what comes to mind?

Hmm, definitely an important topic. Given his current position in the industry and where he will be in ten years, the impact of demographic change cannot be overlooked. Mass retirement of baby boomers and career growth of millennials will be two major trends.

Interestingly, although “retirement age” is often talked about as an age or event, we serve a significant number of clients who have reached “retirement age” but have not. I have a lot of advisors. While many continue to work beyond traditional retirement, others are devoting time to their causes and passions.

So when I think of retirement, yes, I think of the financial aspects and complex income plans that are required, but I also know that my clients need to ‘do’ something when they retire. You can’t “retire” something from your career and expect to live a full life after work.

As cliché as it sounds, you can’t plan on just playing golf five days a week. it will get old.

What this means for us as a business is to help our advisors with things like advanced cash flow planning so that our advisors can provide tax efficient income, real estate planning In the context of a solid set of goals.

What we’ve seen is that clients really need an advisor-driven framework to see assets and expenses. Only then can you set goals and lifestyle preferences.

Given today’s longevity landscape, is your retirement investment process changing?

Yes, definitely.That’s something we’re actively debating and reassessing — the issue of asset allocation in retirement. People are basically righteous live much longerand it affects the portfolio.

Taking the example of a person of real means, if he is 65 and in good health, he must really consider the factors of longevity. This is a big deal, but anyone who has reached a traditional retirement age in good health today may need to plan for 30 or 40 years.

Unsurprisingly, we’re seeing financial planners discuss higher allocations to stocks. They know that the effects of inflation will harm their customers in the long run, and that investing more in stocks is one way to manage the risk of extending the life of an asset.

This raises fundamental questions about what it means to be a “conservative” and a “risky” investor in retirement. I would argue that the definitions of a conservative retirement portfolio and a riskier retirement portfolio require a slightly different meeting.

What’s more dangerous, really? Do you keep most of your assets in stocks or use a nominally conservative portfolio where you are very likely to run out of money later in life when you really need it? Both are dangerous, just in different ways. is.

Obviously you have to strike a balance here based on your client’s risk profile and preferences. For our advisors, it’s about having meaningful conversations with our clients to truly understand what their wants and needs are.

(Photo: Scott Curtis with Raymond James)

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