Large independent firms tend to get most of the headlines for better or worse. That’s true regarding things like big recruiting wins and successful M&A deals. And it’s equally valid when something goes awry, like a legal proceeding or a compliance mishap.
Yet other firms, in many ways, are the backbone of the industry. Indeed, for every firm with thousands of advisors, dozens have a fraction of the headcount but serve millions of investors across the country.
With the holiday season upon us, we checked in with some prominent small-to-midsized firm leaders to see what’s on their minds as we look ahead to 2024.
Our question was simple: What is the biggest issue facing the industry?
Libet Anderson, President, Wealth Management, Concourse Financial Group
While there are many issues facing the financial services industry today, two related ones may cut the deepest for small-to-midsized firms: the pace and severity of regulation and the aging demographics of our financial professionals.
Just in the last few years, the SEC has introduced Regulation Best Interest, its Marketing Rule and the Prohibited Transaction Exemption 2020-02. Now, of course, the Department of Labor has advanced a new fiduciary rule and continues to embrace a proposal that would make independent advisors employees of their broker-dealers.
It takes time, money and resources to comply with each of these initiatives. So, when you consider that the average financial professional is in their 50s or older, you have to wonder how many of them will simply throw up their hands and retire rather than deal with those added obligations.
Andy Christofferson, CEO & President, Berthel Fisher Subsidiaries
The biggest issue facing our industry is the regulatory environment. Even though firms are just starting to get a glimpse of what Reg BI enforcement will look like, the DOL is back with another proposed fiduciary rule that overlaps significantly with it. Meanwhile, the off-channel communication sweep continues to gain momentum.
Most firms, including ours, hoped Reg BI would set the stage for a slowdown in new regulations. That hasn’t been the case. The SEC alone has 24 advisor-focused rules currently in the proposal stage, including a cybersecurity rule that is receiving a great deal of pushback. Keeping up with all the regulations has become very costly for our industry, and it does not look like there is much light at the end of the tunnel.
Jamie Mackay, EVP, COO, SFA Partners
One of the challenges the entire industry faces – not just firms like ours – is getting new professionals trained and up to speed. As opposed to many other service businesses, there’s a ton of education and training that needs to happen before a would-be financial services professional starts supporting retail clients and/or independent financial advisors.
That ever-present problem is exacerbated by some of the dynamics hovering over the broader labor market. I’ve noticed that incoming entry-level professionals are more mindful of student debt than ever. Naturally, they want to be able to pay it off quickly and start saving. Also, wages across the board have spiked since the pandemic.
These things working together have led to more impulsive job hopping within the industry. And because it takes time, money and resources to continually source and train talent, identifying those that can stick it out long enough to reap the rewards can weigh on bottom lines.
James Miller, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at ContributingEd@wealthsolutionsreport.com.
