Make room for investment advisers on the long list of victims from the stock market collapse that began last September. Even after the recent market rally, their clients are scared and angry about the losses in their portfolios, complaints to regulators are soaring, and there are questions about whether the advisory business will ever get back to the way things were in the last bull market.
Cary List hopes not. He's president and chief executive officer of the Financial Planners Standards Council, which sets standards and provides oversight for the country's 17,500 certified financial planners (CFPs), and he sees the bear market as a perfect opportunity to fix some long-standing problems in the advice business.
Carrick:What's it like to be an adviser in the kind of markets we've seen over the past year?
List: What we're hearing is that these are the times that separate those who are in the advice business for the right reasons, doing the right things, from those who were focused on sales transactions and on making their success dependent on market returns.
You're talking about the dreaded mutual fund salesmen here. What's happened with them?
We're certainly seeing a huge increase in interest from within the industry on refocusing away from sales and away from pure investment advice, to a broader form of advice in the form of financial planning.
Is this the investment advice industry admitting it was too focused on flogging product in order to generate fee and commission revenue?
Admission is a strong word, but the industry, by its actions, is acknowledging that perhaps the days of expecting advisers to simply be able to make good investment recommendations are over. I do think we're at a crossroads. Frankly, there's a huge number of positives than can come out of this over the long term.
Okay, let's look at this from the client's point of view. His portfolio may have been down 30 per cent or 40 per cent in the worst of the recent declines, he's been really worried, and you're telling him there are positives out there. What are the positives that would have any relevance to him?
The positive is not in the way of, ‘oh joy, the markets are down.' But sometimes you need to have a crisis to focus on what's really important.
And what's important?
It's a refocus on what really matters to individuals: ‘How can I do what I want in my life with the resources that I have and given the situation that I find myself in?' Investment advice is only one small piece of this. Now, I know this is what most people are focused on right now because of their losses. But I think it's important that we remember there are other things, other than just your investments.
Are clients more satisfied when they get the full advice treatment?
Of those people working with financial planners who actually take a planning perspective, anecdotally, our experience is that they are much less panicked than those with advisers who have been pushing sales at the expense of the bigger picture.
Given the clash between the selling culture and the planning culture, do you see a lot of advisers leaving the business in the months ahead?
We have not seen any CFPs leaving the industry. Now, whether there are people on the pure mutual fund sales side who are leaving, I can't say. I think it's natural that we could see some attrition. Look at other industries that we've seen go through major downtrends, like real estate in the early 1990s. Those who got into the industry for the right reasons, who were properly trained and who built appropriate relationships with clients to provide real value, they end up sticking with it.
