Page 36 - Investment Advisor June 2021

Cover Story

within the new firm, get some exceptions made and have more comfort and a bundled solution set for clients.
agency over how he was going to conduct himself. We’ll continue to watch many teams leave that channel, but
the wirehouses aren’t going anywhere. If anything, they’re
What’s the future of the wirehouses and other broker- becoming larger, because their advisors are growing faster
dealers look like? than ever in those channels. They’re home to the most produc-
LOUIS Regardless of how much market share the inde- tive advisors as far as average production today. They also have
pendent channel picks up, for the most part, it’s been at the a tendency to grow organically, because they have great sales
expense of the wirehouses. There’s always going to be a really cultures and platforms that appeal to many clients.
important place for the wirehouse firms, because so many
advisors thrive under that model.
Even though they put up with some bureaucracy and
loss of control, they do their best when they don’t have to
worry about anything except their clients, where they can
go out and deliver an entire firm to clients as part of the
value proposition. What those advisors value is simplicity,

It’s All Hands on Deck as

BDs Enter Rougher Waters

Here’s why so much of our industry’s financial
future is tied to compliance and what that
means for today’s broker-dealers.

The next few years will be all about regulation, as broker-
dealers figure out the proper balance of Regulation
Best Interest’s disclosure, tracking and recordkeeping.
Advisors at some broker-dealers tell us the new disclo-
sures required to satisfy regulators have become suffo-
catingly unacceptable, though not much has changed at
other firms.
The future balancing act for most broker-dealers, though, ‘Bad’ Commissions
will be implementing enough disclosures and recordkeep- Reg BI has demonized regulators’ perception of commis-
ing to avoid fines but not so much that their advisors find sion-based products to the point that they look at, for
the paperwork and related requirements oppressively long example, variable annuities as “bad” and also earning com-
and complex. missions (rather than fees) as “bad.” If an advisor or com-
Geneos Wealth Management President and Chief pliance officer is being questioned over a variable annuity
Compliance Officer Jodee Brubaker-Rager feels that by hav- sale, they find it to be: You are guilty until you can prove
ing its own technology firm, the BD has been able to make your innocence.
the required changes to supervise and electronically maintain Many firms have become downright paranoid about com-
records in order to comply with the new rules. Still, creating mission-based sales and the potential blowback from regula-
multiple disclosure forms and supervisory systems has been tors, making advisors’ ability to have commission-based busi-
a bigger project than it first anticipated. ness increasingly difficult.
But Geneos is the exception and not the rule. Many firms This likely will be a primary driver in reduced commission
are likely to discover how deficient their record keeping is sales in the coming years, and that will especially affect BDs
when fines are imposed on them over the next year or so. that rely more on sales tied to commission-based mutual
Plus, disclosures and supervision aren’t the only aspect of Reg funds, variable annuities, alternative investments and fixed Adobe stock
BI that will be problematic going forward. index annuities.

34 INVESTMENT ADVISOR JUNE 2021 | ThinkAdvisor.com