Through the years, one of the differentiating elements of the independent retail financial advice space has been that independent financial advisers are almost entirely responsible, at the end of the day, for engaging and winning new client relationships.
The time has come for independent broker-dealers to play a bigger behind-the-scenes role in helping advisers win more client relationships.
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There will always be challenges associated with heightened regulatory complexity, demographic changes and shifting consumer behavior, but when you strip away those factors, here are the top three ways IBDs can help advisers bolster their businesses by winning new clients:
1. Build client segmentation and data analytic tools that transcend day-to-day practice management considerations. Virtually every industry relies on client segmentation to reveal which customers present the most value and require a bit more attention. Our industry is no different and firms have provided advisers with client segmentation models and other relevant data analytic tools for years. Often, though, advisers look at client segmentation through the lens of practice management, which limits the focus on existing clients.
Firms should expand the scope of these data analytics tools to include potential prospects that may be a good fit for an adviser's business based on the clients they already serve. Obviously, added capabilities like this will help advisers in their business development efforts, but it will also benefit retail investors, who can take comfort knowing that their would-be adviser works with others who have very similar profiles.
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2. Demonstrate no out-sized incentives for offering one investment product over another. Perhaps the most important obligation an independent broker-dealer has to its advisers is to provide a broad enough selection of investment products to help ensure that clients can reach their financial goals. If a product can hold up to an exhaustive due diligence process, advisers should have the option of accessing it, no matter who the product sponsor is.
As we know, many of the financial adviser channels don't share this point of view. Because potential prospective clients are unlikely to immediately grasp this fundamental difference, IBDs should provide their advisers with turnkey messaging for use in prospective client conversations that best help them communicate about how the independent model specifically enables advisers to meet a greater share of their clients' present and future needs on a truly conflict-free basis.
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3. Provide advisers with the latitude to allow clients the discretion to choose a fee structure that best aligns with their needs. Much of the industry's focus in recent years has shifted toward the advisory model. Aside from regulatory concerns, many advisers believe this model not only represents the best way to deliver conflict-free advice, but provides them the greatest opportunity to grow their business.
Yet, paying commissions still makes the most sense for many investors who either have a significantly lower size of total assets or orient more towards a do-it-yourself approach with only periodic involvement from a professional adviser. As such, firms should continue to clearly provide advisers with the flexibility to choose the business model that best aligns with their clients' needs, and retail investors should be empowered to choose how they want to pay for access to their adviser's expertise.
While there is a compelling argument to be made that there's never been a better time to be an independent adviser, the only way to maximize the benefits of independence is by aligning with a partner firm that appreciates the importance of providing the resources and support necessary to both serve existing clients and win new ones.
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John C. Johnson is the president and chief executive office of National Planning Corporation, part of National Planning Holdings, the network of independent broker-dealers.
