Page 32 - Investment Advisor October 2022

Cover Story

“The more challenging the time, the more this model extraordinary level of growth for a second year,” he added.
resonates. And we have proven this again and again. Ultimately, “And you see the wirehouses, they suffer much more in the
fiduciary advice is simply superior to any other form of advice, crisis and recover much more slowly and this is ultimately a
you know, that you can get in the wealth management indus- reflection of the superior fiduciary advice model that really is
try,” according to the CEO. the foundation of the RIA industry.”
Focus reviewed the past six or so economic crises, “and What’s driving this success and what might do so in the future?
what you see is, in the year of the crisis, [as] was proven again “We are constantly out there talking to our partners. We are
in 2020, RIAs do significantly better than the traditional play- constantly interacting with them and we’ve got, I think, a pretty
ers. But then, even more important and more powerful, when good cross section of what’s happening in the industry. The
you then look one or two years after, the normal growth rate good news is clients are so well trained to weather this storm,”
of the RIA industry is almost double. The RIA industry grows Adolf said. “Equally good, [and] I hear it again and again, referral
about 10% [in] the year of the crisis,” Adolf explained. volumes are excellent. We are seeing very good momentum from
“The industry grows at 17%, and it then sustains this satisfied, confident clients referring prospects to our partners.”

5 Predictions for the Future of Advice
“You can’t serve two masters: Under the SEC, you can be a He looks forward to
fiduciary for part of the [client] relationship … and then have resolution when “the
another account that’s a brokerage account. [But] you can do field of financial plan-
some really bad stuff because a different standard applies,” ning and investment
fiduciary expert Ron A. Rhoades argues in an interview with advisory moves
ThinkAdvisor. closer to becoming
Commenting on a number of industry issues — and sparing a true profession.”
no criticism of the Securities and Exchange Commission — Here are excerpts
the longtime fiduciary advocate, professor, attorney and from the interview:
financial advisor makes five major predictions regarding the
future of financial and investment advice in this interview. Let’s first discuss your
Among them: “Regulators will eventually concede that being prediction: “Regulators will
a distributor of investment and insurance products is contrary eventually concede that being a distributor of investment
to acting in a customer’s best interest” and that “no-commis- and insurance products is contrary to acting in a customer’s
sion annuities will drive sales of variable annuities and fixed best interest.”
annuities; fee-only RIAs will expand the market for purchases.” You can’t serve two masters: If someone has gained your
Rhoades, associate professor of finance and director of the trust and confidence, you should be willing to continue to be
Personal Financial Planning Program at Western Kentucky their trusted expert, a fiduciary, at all times in the relation-
University, is also a financial advisor and education content ship. The problem is there are still a lot of people saying
specialist at ARG Investment Services, an RIA. In the inter- they’re fiduciaries but who are just product [salespeople].
view, he calls the SEC’s Customer Relationship Summary The whole concept of dual registration is not a good
form “atrocious.” one as it’s applied now. When you develop a relationship
Form CRS, which firms have been required to furnish to cli- of trust and confidence with [an advisor], you’re likely
ents since 2020, provides no way for a consumer to “tell the to continue to trust them even if the information you
difference between, for example, “a product seller and a fee- receive is contrary to your best interest, [substantial]
only advisor,” he says. The multi-award recipient and prolific research shows.
author recently was interviewed from his home in Kentucky. If someone does a financial plan as a fiduciary, for them to
What’s blocking consumers from getting sound financial implement it by selling you expensive products that are often
advice tailored to their goals and needs? “There are still a lot of a proprietary nature, they’re basically not adhering to the
of people saying they’re fiduciaries but who are just product duty of loyalty.
[salespeople],” he maintains. “It’s still way too difficult for a Consumers need to know who a fiduciary is and who a
consumer to tell the difference between someone they can product salesperson is. If they ask, “Are you a fiduciary?” the
really trust and someone they can’t.” response is “I’m legally bound to act in your best interest.”

30 INVESTMENT ADVISOR OCTOBER 2022 | ThinkAdvisor.com