As a follow up to last week's blog, which was a roundup of top advisor events in 2013 ("Much of 2013's Important News Arose From What Didn't Happen"), here's my look ahead at what independent advisors might expect in 2014. While I hope we've learned to discount out of hand any predictions of specific events, we can discern trends that appear likely to continue, barring any unforeseen events. One trend that isn't likely to continue is the stock market posting 25% annual gains: I'll be very happy to be wrong, but I wouldn't count on it, and neither should you. While independent advisors will undoubtedly continue to attract new clients anxious to get in on the new "boom," advisors will need to dust off their programs for managing client expectations, and get their clients—both old and new—into a more realistic mindset. Here are some thoughts about a few trends that are far more likely to continue:
- The Explosion in Advisor Technology
If the flood of breakaway brokers going independent has a silver lining, it's that major tech companies have finally noticed the independent advisory world. Technology, of course, has been the driving force behind the 30-year explosion in independent advice. When mainframes ruled the digital roost, only the largest brokerage firms controlled the information they held. But with the rise of the microprocessor and the Internet, independent advisors have the whole world literally in their back pockets. While we've still haven't sorted out the best ways to harness the power of the Internet (I'm just guessing that pornography, vacation pics and online dating ain't it), the power of independent advisors seems to double every year: even 10 years ago, who would have guessed that advisors would seamlessly work with multiple custodians, offer highly customized allocations with layers of model portfolios, or mass communicate with clients in real time? Look for all these functions to increase exponentially, as well as applications we haven't thought about: Can anyone say self-clearing?
- Increased Regulation
As I wrote last week, most indicators point to a fiduciary standard for brokers being dead in the water; my best guess is that faced with overwhelming pressure by the securities industry for a watered-down standard that will be better for marketing than for investors, new SEC chair Mary Jo White will punt, and put a new standard on the shelf. However, to appease the industry and its backers in Congress, the Commission will step up its regulation of already client-centered RIAs, under the "harmonize regulation" mandate of Dodd-Frank. Look for increased in-office audits and more citations for petty violations to prove the SEC is "doing something." (As far as I can tell, not one of the increased audits has turned up an actual client harm and/or criminal wrongdoing.) Hopefully, the Commission will hop on the tech train and require advisors to electronically file annual audits, which could be digitally reviewed with far greater precision and at far less cost. It's bound to happen sooner or later.
- Adding Healthcare Services
