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A Financial Services Insider Speaks Out

J. Patrick Collins Jr., CFP®, EA

John Taft, the ex-CEO of RBC Wealth Management, recently joined the executive team of RW Baird, a smaller, more regional, and independent financial services firm.  He wrote an article on their website that I found particularly interesting since he addressed one of the big trends happening in the financial advice business.  The move of both advisors and clients from these big “wirehouse” firms like RBC, Merrill Lynch, and Morgan Stanley, to smaller independent firms.  Greenspring Advisors has been on the front lines of this trend for the past 13 years so we can attest that it’s not slowing down.

Taft, in describing the experience of working at these two different firms, writes:

The result is two entirely different types of client experiences. And two entirely different types of employee cultures.

I’ve worked in both.

I’ve been a client of both.

And in my experience, there is absolutely no question that the independent, employee-owned, decentralized advice model offers the opportunity for better client outcomes and the opportunity for a better employee culture.

Which isn’t at all surprising. Because in wealth and asset management, client experience and employee culture are interrelated. Wealth and asset management are people businesses. In people businesses, employee engagement translates directly and immediately into client satisfaction. Get culture right, and anything is possible. If not, then nothing else matters.

Having started my career at a big firm, I can attest to everything he is saying.  What’s interesting is that even among the independents you have a wide variety of models.  Baird, while not publicly traded, still has quite a large component of their business dedicated to selling products for a commission.  On the opposite end of the independent spectrum, you have firms like Greenspring Advisors, who are totally independent from the standpoint of employee ownership and perhaps, more importantly, product commissions.  For these firms, they only answer to their clients because that is where their revenue comes from.  As a client, it is important to understand that not all independent firms are equal.

With that being said, Taft’s last point really hit home:

Instead, at big firms, a soul-crushing combination of top-down risk management and profit-maximizing imperatives leads to the kinds of initiatives you’ve read about recently – like “cross-selling”; or transferring smaller clients to “robo advisor” services centers; or threatening to sue employees if they move to other firms.

Which is driving out the best financial advisors and investment advisors. Who don’t want to be told what to do. Who don’t want to be manipulated. Who don’t want anything to stand between them and doing what they believe is the best possible job for their clients.

I have numerous stories of that “soul crushing” he speaks about from my early days in this industry.  We are excited that the trend towards independence and objectivity is continuing to accelerate.  The main benefactors turn out to be the clients.