Gotta Love Independence
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Our exclusive survey of independent contractor reps quantifies what we thought — indie reps love their freedom, but being on their own can be a challenge (see “Insights on Independents,” Page 85).
Those challenges are why there's never been a mass migration to the indie channel from wirehouses and regionals. Most brokers at traditional firms are salespeople, not businesspeople. Taking personal financial risk, working alone and throwing out the trash doesn't appeal to most employee reps.
Here's a tip for traditional firms: Respect brokers' need for independence and you'll minimize attrition.
Our annual Brokerage Report Card survey of wirehouse reps also shows that freedom is cherished.
Who'd a Thunk It
Who would have predicted that the online discounters would one day join the party?
Most of the major onliners are targeting independent advisers, hoping to bring the assets those advisers control to their platforms (see “CSFBdirect, Ameritrade Target Advisers,” Page 40). The discounters finally seem to understand that most people need some expertise and guidance with their money.
But these firms have something to teach, too. All of them are going after independent fee-based advisers. Why?
“The independent investment adviser model is winning in the marketplace,” says Gerald Graves, COO of Schwab Institutional.
Financial advisers who are free of corporate interference and free of the commission-based sales model may well have a leg up.
Your Fate in Court
Federal judges are deciding what is appropriate conduct for brokers who change employers.
The latest case comes from Ohio, where a judge painstakingly ruled that a broker's announcement to clients of a job change is OK, but saying anything beyond that is verboten, at least under terms of a Merrill Lynch employment agreement (see “Courts Rule on ‘Solicitation’ Question,” Page 42).
This case is actually seen as a victory for brokers. In some states, you can't make any contact at all if you've been enjoined.
I am puzzled why both courts and regulators seem to overlook the ’34 Act's basic premise of upholding the public interest. Someone will have to explain to me why it is in an investor's interest to restrict what their financial adviser can say to them.
Best of luck,
Account Aggregator — Killer App
Merrill Lynch and Salomon Smith Barney have joined Morgan Stanley Dean Witter in launching account aggregation services for clients (see “Major Firms Jump Into Account Aggregation,” Page 56). Account aggregation could be the killer application of asset gathering. The technology lets clients access all of their online financial accounts, get a consolidated statement, do basic analytics, transact business, and soon, transfer money and assets.
By the time you read this, both Merrill and MSDW will be running training sessions for brokers on how to use aggregation services. I suggest paying attention. This tool will be a critical piece of planning that most investors won't do on their own.
Meanwhile, a prediction: Aggregation technology will bring the industry's chronic account-transfer problem to a head. As investors are able to consolidate their assets, and move money and securities at the touch of a button, they are not going to put up with delays.
In fact, the day will come when the masses will enjoy “cyber custody” of their assets. Firms will no longer hold assets, so they won't be able to play games with the financial lives of customers and brokers.
