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Wire-House Financial Advisors’ frustration and anger was reconfirmed this past June in Gallup’s annual poll of America’s Most Trusted Institutions. Only 1 in 4 Americans trust Banks. Even worse, just 1 in 7 trust Big Business. Looking at the survey, I can’t help but wonder, do wirehouse clients see their Financial Advisor’s employer as a “Bank” or a “Big Business?” Maybe they see it as both.
It’s easy to understand why so many Americans distrust big banks. For a large number of people, it started when the US Government had to bail them out in 2008. As we all remember, predatory lending practices by big banks to unqualified borrowers created an unfathomable amount of subprime debt. Sadly, banks weren’t the only perpetrators. Wall Street’s greed led many of the biggest wire-houses to buy subprime mortgages. In their case, however, wire-houses used leverage (margin) to buy more than they could rightly afford, which compounded their losses when the market collapsed.
On a smaller scale, banks aren’t trusted because of persistent, even aggressive, credit card sales, and the cross selling of non-interest bearing checking accounts with monthly nuisance fees. Finally, after customers are on-boarded, they’re relegated to faceless service centers (aka 1-800 lines) when they have questions or problems with their accounts.
Big Business has a 14% trust rating in Gallup’s poll which is even worse than banks. JUST Capital,* a non-profit that’s surveyed more than 172,000 Americans since 2015, reports in their 2023 survey that Americans think companies focus too little on employees and too much on shareholders. The survey also reports that Americans believe big companies need to be much more transparent to build trust.
In general, Americans believe big companies are overly focused on profits. They want to see companies find a better balance between doing what's right for society and making money. Americans want a more just economy, and it starts with big business.
Wire-House Financial Advisors are tired of answering clients questions each time a scandal arises. They’re tired of explaining or rationalizing why their bank is paying a $50,000,000 regulatory fine, or how a rogue trader lost $250,000,000 using a shadow account unknown to his superiors. These issues have an impact on an advisor’s livelihood, and I often wonder if banks and big businesses even care.
A Financial Advisor’s journey isn’t easy. They labor tirelessly for 10 years building their practice. Their client relationships are built on holistic financial planning, carefully constructed investment portfolios, and goals-based performance reviews (college, retirement, etc.). Their teams also provide highly attentive personal service year after year. Of course, advisors perform these functions during bull and bear market cycles, geopolitical instability and unforeseen market disruptions (aka Black Swans). Finally, advisors always have to be prepared for the unexpected personal challenges clients sometimes face such as a divorce, a cancer diagnosis or a family loss. Essentially, the bedrock of all advisor-client relationships is honest dialogue, genuine care, and personal warmth. Trust matters, and Financial Advisors know it.
The Gallup Poll ranks “Small Business” as #1. It’s my wholehearted belief that an Independent Financial Advisor is akin to a Small Business. Hence, they too are #1. The independent channel has been around for 50 years, but it was lackluster for decades. However, it’s really surged in the past 10 years due, in large part, to the exodus of Big 4 wire-house Financial Advisors. They know the Gallup Poll’s results firsthand. Impressively, it’s the industry’s top advisors who are going independent. They’re the ones who aspire to own their own business. They’re the entrepreneurs. They want to be #1 on Gallop’s “Most Trusted” list.
Best of all, the independent channel has quickly become a robust option for Financial Advisors. First and foremost, advisors will be impressed by the number of high quality companies in the space. Some of the best firms have been built by executives who were former wirehouse advisors, branch managers and senior leaders. The platforms are equal in every way to their wirehouse counterparts. The one exception might be mortgages since they act as fiduciaries.
I dare say the independent channel has many advantages over the wirehouse model. Advisor marketing is top-of-the-list. Independent Advisors have highly personalized custom websites. Their social media presence is superior in comparison. They can more freely publish on LinkedIn, produce Youtube videos, and even be a regular guest on Bloomberg TV or CNBC. Next on the list is human capital. Independent firms aren’t constrained by company imposed “headcount limits.” Nor are they limited to titles that don’t properly reflect each person’s role on the team. Big teams nowadays have Portfolio Managers, Financial Planners, Business Managers, and, in some cases, even a Client Concierge. Naming them accordingly shouldn’t be a compliance no-no. One more differentiator is technology customization. Financial Advisors have strong views on what’s the best investment proposal tool, the best performance reporting tool, and the best financial planning software. Independent financial advisors have the opportunity to custom build the technology that suits their needs to best serve their clients.
If you’re new to the Independent Channel, I suggest speaking to a top Recruiter. In my experience, the best ones are true “Advisors.” Like any industry-leading Advisor, they will get to know you and your team. Understanding your personal and professional goals is paramount to them. Just as important, Recruiters know the industry landscape, which firms are best, and the key executives. They can make the proper introductions, and help you negotiate the financial terms of a transition. As you know, one should never underestimate the value of a great Advisor (Recruiter).
Let me close where I began. America has voted. Banks and Big Business are OUT. Small Business or Independent Firms are IN. Since we know the polls won’t change 2 or 3 years from now, Financial Advisors only have two choices. One, remain at a bank and, through no fault of your own, live with America’s condemnation. Two, move to the Independent Channel and enjoy America’s respect and admiration.
*JUST Capital is a 501[c][3] non-profit committed to building an economy that works for all Americans. Visit their website at justcapital.com.
Jan 22, 2024
America Has Voted: Banks & Big Business Are Out
It’s easy to understand why so many Americans distrust big banks. For a large number of people, it started when the US Government had to bail them out in 2008. As we all remember, predatory lending practices by big banks to unqualified borrowers created an unfathomable amount of subprime debt. Sadly, banks weren’t the only perpetrators. Wall Street’s greed led many of the biggest wire-houses to buy subprime mortgages. In their case, however, wire-houses used leverage (margin) to buy more than they could rightly afford, which compounded their losses when the market collapsed.
On a smaller scale, banks aren’t trusted because of persistent, even aggressive, credit card sales, and the cross selling of non-interest bearing checking accounts with monthly nuisance fees. Finally, after customers are on-boarded, they’re relegated to faceless service centers (aka 1-800 lines) when they have questions or problems with their accounts.
Big Business has a 14% trust rating in Gallup’s poll which is even worse than banks. JUST Capital,* a non-profit that’s surveyed more than 172,000 Americans since 2015, reports in their 2023 survey that Americans think companies focus too little on employees and too much on shareholders. The survey also reports that Americans believe big companies need to be much more transparent to build trust.
In general, Americans believe big companies are overly focused on profits. They want to see companies find a better balance between doing what's right for society and making money. Americans want a more just economy, and it starts with big business.
Wire-House Financial Advisors are tired of answering clients questions each time a scandal arises. They’re tired of explaining or rationalizing why their bank is paying a $50,000,000 regulatory fine, or how a rogue trader lost $250,000,000 using a shadow account unknown to his superiors. These issues have an impact on an advisor’s livelihood, and I often wonder if banks and big businesses even care.
A Financial Advisor’s journey isn’t easy. They labor tirelessly for 10 years building their practice. Their client relationships are built on holistic financial planning, carefully constructed investment portfolios, and goals-based performance reviews (college, retirement, etc.). Their teams also provide highly attentive personal service year after year. Of course, advisors perform these functions during bull and bear market cycles, geopolitical instability and unforeseen market disruptions (aka Black Swans). Finally, advisors always have to be prepared for the unexpected personal challenges clients sometimes face such as a divorce, a cancer diagnosis or a family loss. Essentially, the bedrock of all advisor-client relationships is honest dialogue, genuine care, and personal warmth. Trust matters, and Financial Advisors know it.
The Gallup Poll ranks “Small Business” as #1. It’s my wholehearted belief that an Independent Financial Advisor is akin to a Small Business. Hence, they too are #1. The independent channel has been around for 50 years, but it was lackluster for decades. However, it’s really surged in the past 10 years due, in large part, to the exodus of Big 4 wire-house Financial Advisors. They know the Gallup Poll’s results firsthand. Impressively, it’s the industry’s top advisors who are going independent. They’re the ones who aspire to own their own business. They’re the entrepreneurs. They want to be #1 on Gallop’s “Most Trusted” list.
Best of all, the independent channel has quickly become a robust option for Financial Advisors. First and foremost, advisors will be impressed by the number of high quality companies in the space. Some of the best firms have been built by executives who were former wirehouse advisors, branch managers and senior leaders. The platforms are equal in every way to their wirehouse counterparts. The one exception might be mortgages since they act as fiduciaries.
I dare say the independent channel has many advantages over the wirehouse model. Advisor marketing is top-of-the-list. Independent Advisors have highly personalized custom websites. Their social media presence is superior in comparison. They can more freely publish on LinkedIn, produce Youtube videos, and even be a regular guest on Bloomberg TV or CNBC. Next on the list is human capital. Independent firms aren’t constrained by company imposed “headcount limits.” Nor are they limited to titles that don’t properly reflect each person’s role on the team. Big teams nowadays have Portfolio Managers, Financial Planners, Business Managers, and, in some cases, even a Client Concierge. Naming them accordingly shouldn’t be a compliance no-no. One more differentiator is technology customization. Financial Advisors have strong views on what’s the best investment proposal tool, the best performance reporting tool, and the best financial planning software. Independent financial advisors have the opportunity to custom build the technology that suits their needs to best serve their clients.
If you’re new to the Independent Channel, I suggest speaking to a top Recruiter. In my experience, the best ones are true “Advisors.” Like any industry-leading Advisor, they will get to know you and your team. Understanding your personal and professional goals is paramount to them. Just as important, Recruiters know the industry landscape, which firms are best, and the key executives. They can make the proper introductions, and help you negotiate the financial terms of a transition. As you know, one should never underestimate the value of a great Advisor (Recruiter).
Let me close where I began. America has voted. Banks and Big Business are OUT. Small Business or Independent Firms are IN. Since we know the polls won’t change 2 or 3 years from now, Financial Advisors only have two choices. One, remain at a bank and, through no fault of your own, live with America’s condemnation. Two, move to the Independent Channel and enjoy America’s respect and admiration.
*JUST Capital is a 501[c][3] non-profit committed to building an economy that works for all Americans. Visit their website at justcapital.com.
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