The last 50 years in the investment industry have presented us with many significant changes and most have been improvements. For example, eliminating fixed brokerage commissions ushered in the new world of lower costs, increased investment opportunities, and better delivery systems. Investors now have flexibility in the ways in which they access capital markets. The introduction of contributory and self-guided company and individual retirement plans has allowed us to uniquely build toward our future financial security. There is much more we can recount but let us turn to our future and examine what is occurring now and determine what it may offer us.
The investment industry has moved away from the dominance exerted by large investment company vertically integrated business models. Long time readers here will be familiar with the cautions we raise over potential conflicts of interests when your advisory firm also manufactures the investment products being promoted to you. The independent Registered Investment Advisor (RIA) has grown in response to that problem, and the best of them avoid proprietary products. We work only for our clients and moved away from the large, integrated firm model 26 years ago when that trend of investment banking driving retail client recommendations accelerated. Veteran industry people point to us as having helped lead that movement. We also led in the move away from transactional commissions, which have their own potential conflicts of interest, and toward fee-based investment management which puts our interests in line with those of our clients. We take what we feel is justifiable pride in having implemented those steps to lead our industry and better our work on behalf of our clients.
Another productivity-enhancing area is with technology for both record-keeping and to introduce uniform quality investment management. We have come a long way from keeping client conversation notes on large cards alphabetically stored in metal bins to our current sophisticated software that allows all members of your team to see what is happening in your accounts in real time. We have traveled far from monthly statements as the window to your investments to electronic portals from which to monitor your holdings and results 24/7/365. Our financial planning software allows your financial advisor and financial planning analyst to uniquely plot your course toward your financial objectives and life goals.
Finally, we left the old model that many of our competitors still employ and that is individual compensation of financial advisors based on products and services sold. Our advisors and all our employees are compensated by salary and a bonus that is pointed toward only one benchmark – client investment asset growth and retention. All our personnel take pride in doing a good job for our clients and their compensation is in line with that objective. Importantly, we are majority owned by an Employee Stock Ownership Plan (ESOP). All our employee-owners are vitally interested in your happiness with our service to you.
WHAT MIGHT THE INDUSTRY PROVIDE IN THE YEARS AHEAD AND HOW WILL THAT BENEFIT YOU? NO ONE IS CLAIRVOYANT BUT THERE ARE SOME TRENDS BUBBLING NOW THAT PROVIDE A GLIMPSE OF WHAT MAY BE IN OUR FUTURE.
First, much as the medical profession is involving the patients in the management of their health, we have already done that with our collaborative approach to the pursuit of your financial success. Any prospective client of our firm will be asked three questions prior to beginning the process of data discovery and the creation of a unique financial plan.
a.) What are you trying to accomplish through your finances and in your life?
(Hint: “make a lot of money” isn’t a complete answer). We spend much time developing the picture you see in your mind’s eye as to what you want you and your family’s future to look like.
b.) What is getting in the way of accomplishing that?
The answers, while they may be similar, are different for each investor. We need to know that so we can counter the problems. You have a sense of what is holding back your financial success from reaching its full potential and we want to hear that.
c.) What do you think should be done to correct the problem?
You have thoughts on this, and your answers will often be revealing and those answers to all of these questions are crucial in understanding your goals, your thought process, and the unique aspects of your situation. Just as medicine has come a long way from giving everyone a penicillin shot for any malady, so has our industry moved from touting the hot stock of the month.
Second, the delivery system for this process is moving at a rapid pace. The old brokerage firm model with its inherent potential conflicts has given way to the independent advisor working for the client rather than the investment house. But because of the growing sophistication of products and delivery systems, the independent advisory firm must possess sufficient scale and capital to marshal the required resources to provide its clients with the most competitive opportunities for success. We recognize that and devote much of management’s time and the firm’s capital to making sure we are positioned to give you the most sophisticated level of services and investment opportunities.
Third, the ongoing education of our owner-employees is a significant differentiator. Our people are regularly trained on planning techniques, investment opportunities and the changes in our industry from which we serve you. All financial planning recommendations and investment management action is fashioned collaboratively, and that aspect of our practice is different from much of our competition. We do that because we feel that it is best for you to have the collective thinking of all our professionals rather than be dependent on only one individual’s views. The medical profession refers to that as peer review and we believe that adds a layer of assurance.
We are sincerely grateful to our clients who have entrusted us with their financial guidance and management and who have remained loyal through the years and decades, many for all five of those decades through multiple generations of their families. We pledge to honor your trust with our continued efforts to bring you the best that our industry has to offer in that march toward your financial security.