The answers from two planners — Dave Grant of Vantage Financial Partners in Arlington Heights, Ill., and Rick Carlson of Carlson Advisors in Tomah, Wis. — were intriguing.
“I read that piece with interest yesterday and was glad that someone had the courage to put into writing what many advisors already know,” Grant told me. “Younger planners in particular are already sensitive to the notion of selling products to clients, and pieces like this make them even more wary of researching employment at a big Wall Street firm. Many young planners are expressing an interest in only working in the fee-only profession, and those that go off into these Wall Street firms often come out a little jaded,” added Grant, who is founder of NAPFA Genesis, a group of fee-only planners age 33 or younger.
“I spoke to a colleague at a study group recently and he told me how working at one of these firms was hard for him because the system was ‘broken’ for the client. The only way he could comfortably provide advice was leaving to join a firm where advice was valued over product sales.”
Grant noted that, “Being employed by an independent firm, I was happy to read this piece. We frequently see people who have investment accounts at these firms, and the next year it may look completely different, implying that product sales are driving the make-up of the account and not the goals of the client. When we explain our investment philosophy and how it is related to goals and not products, they don’t understand why their previous advisor was not doing that. … It makes our job at an independent firm that much easier.”
For his part, Carlson worried that the political response to Smith’s charges would be a broad-brush approach to regulating the financial industry — all of the financial industry.
“Good or bad, we are to some extent lumped in with all investment firms, and so our reputation for what we do for a living is harmed,” he told me. “The real downside to this story, and events of the past three years, is the excessive regulation we are facing as an industry. That, more than anything, is the greatest threat to our ability to serve our clients. … This article probably just adds fuel to the fire for this administration to keep regulating.”
But Carlson noted that, from his base in rural Wisconsin, “as an independent advisor in a small town, the events at Goldman Sachs don’t have any direct bearing on the relationships we have with our clients. Our clients continue to trust us to give them our best advice. Those advisors that do that will be able to maintain good relationships. I don’t know that I would go so far as to say that the Goldman Sachs story will enhance our position with our clients. My experience has been that clients are not really concerned with the firm that you work for, as they have a relationship with ‘me.’ ”
The pain is shared widely when the reputation of an industry is called into question. That said, clients do understand and value their planners’ independence. If anything, personal relationships between advisors and clients will mean that much more in light of the latest revelations from Wall Street.