Since last April, Securities America has shed close to 100 financial advisors, and has been bought out by Ladenburg Thalmann Financial Services for $150 million.

So, will the remaining advisors remain loyal or jump ship?

Well, it appears that Securities America is making an effort to keep its advisor force on board, especially those with practices that are run on fee-based models.

Deals are being negotiated and some competitive retention bonuses are being offered to advisors based on production, profitability and business growth, a spokesman for the company has reported.*

Administrative fees charged to brokers have been dropped from a 20 basis point fee to 10. Whether or not these efforts to keep advisors on board remains to be seen.

Many of them are in a “holding pattern” looking to see how Ladenburg Thalmann’s investment banking and capital markets businesses will affect their work…independent advisors don’t want to be told what to sell.

I hear Securities America is hosting town hall-styled teleconferences to answer financial advisors’ questions, but I’m banking on more advisors looking for a new home.

*OnWallStreet, August 18, Donna Mitchell, “Securities America Sweetens Retention Packages Following Sale”

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There has been a “rumble” since January when the SEC announced that FINRA would soon be regulating RIA’s and fiduciary standards would apply to broker-dealers.

Most of the RIA’s seem pleased about a uniform standard of conduct, but cautionary about the prospect of oversight by FINRA. Currently under regulation by the SEC, if their assets top $25 million, they fear an over regulatory burden (endless rules and paperwork), and would prefer a self-regulatory organization (SRO) and this may just happen. The battle will go to Congress.

For an in depth look at the pros and cons, see the link below, “The Tradeoff” by Larry Light for Financial Planning.

http://www.financial-planning.com/fp_issues/2011_3/the-tradeoff-2671696-1.html

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The continuing devaluation of Chinese currency is bound to have large-scale effects on the American consumer.

As our economy has shifted towards a service-based one, we have outsourced almost all production to China, Japan, Taiwan, and Latin American countries. As most of the developed world experiences typical inflation, China’s economic policy in recent years has been to keep their currency artificially low in order to force basement-bottom prices on goods exported to America.

So far, this arrangement has been functioning. However, sooner rather than later the Chinese economy will force it to accurately represent its currency. This will skyrocket the prices on goods manufactured in China.

As a result, Americans and American communities should focus on supporting local markets and production sources in order to insulate themselves from the coming storm. Farmer’s markets, and for production goods American-made items will help our economy weather what is sure to be a trying time for much of the world.

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Although, high net worth clients say they are recovering their losses from recent years, they are still concerned about their financial future. After the recent election, investors feel the economy is looking brighter, but there is still cause for concern. There are many questions unanswered regarding regulations facing the financial securities industry that will affect most advisors.

A positive note is most clients are happy with their current financial advisors. They have managed to ride out the downturn with their advisors without jumping ship and are happier for it. This year, the rebounding of the financial markets has helped investors regain some of their losses.

Investors may still be conservative with purchases and investments, but they remain confident the economy will continue to rebound.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed in July by President Obama. This will require most financial advisors who have up to $100 Million in assets under management to register through the state instead of the SEC. Previously, advisors only had to register with the state if they had less than $30 Million in assets under management. The process of registering through the state is more time consuming and complex than registering with the SEC.

This will not affect advisors who 1) “act as advisors to an investment company registered under the Investment Company Act of 1940; 2) act as advisors to a company that has elected to be a business development company pursuant to Section 54 of the Investment Company Act of 1940 and has not withdrawn the election; 3) would be required to register with 15 or more states”, according to Scott Gottleib, President, U.S. Compliance Consultants, LLC.

If you are already registered with the SEC and are under $100 million in assets under management, do not withdraw from SEC registration before you receive your state registration. Once you remove your SEC registration, you will not be registered with any jurisdiction.

Having to register through the state can be frustrating because state regulators have no time constraint. Be prepared to wait more than the 45 days the SEC is confined to for registration. The average length of state registration could take from 60 to 90 days.

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According to a new report from Cerulli Associates, Inc,

“…the average age of an advisor is 49, although it may be even older since the firm analyzed predominantly fee-based advisors – a group that tends to be younger.”

Many big firms are trying to set up more training programs to entice younger finance professionals to join the business. This will help keep accounts from leaving the firm when older advisors decide to retire. According to the Cerulli report, “a number of financial firms have launched training programs, but the report showed that a larger broker-dealer needs to add 2,000 to 3,000 financial advisors ‘just to keep pace’.”

Financial firms have a lot of work to do and quickly to even attempt to replace its older advisors. There is plenty of room for younger advisors to acquire a baby boomer’s book of business.

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With the downturn of the economy and markets these past few years coupled with the longer life expectancy, many clients are not going to reach their retirement goals.

According to Hilary Johnson’s article in Investment News, financial advisors are re-allocating funds for their clients to a more aggressive model to help their clients reach their retirement goals.  Is this best decision considering how volatile the markets still are? 

Or should advisors encourage their clients to set a realistic goal about their financial needs instead of their financial wants until it has been achieved?

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An interesting survey by Jefferson National cited that about 50% of 750 fee-based advisors interviewed said they are turning to a “tactical management” strategy, while 68% are feeling pressure to revise their asset management strategy from the traditional “buy-and-hold” strategy. Only 34% said their clients are more confident with the traditional buy-and-hold.

So, how’s it work and why in a volatile market climate?

The feeling is that the markets will continue to show volatility until a solid market recovery is more evident and the tactical strategy is designed to allow rebalancing the percent of assets held in various categories, therefore taking advantage of certain situations in the market as they occur.

It’s definitely an active strategy since financial advisor managers return to the original asset mix when the desired short term profit is achieved.

Looks like this current trend will keep the fee-based advisors “on their toes” and more alert for ever changing market trends; I’ll tell you one thing…they are going to have to be more “connecting” with their clients than in the past.

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Those wirehouse firms where defecting financial advisors have been fleeing from are coming after you…and FINRA is backing them!

Over the past year, firms have been aggressively trying to collect departing advisors’ “loans” – you know, that upfront cash they recruited you with based on your trailing 12 month production. (There was that fine print clause that the advisor must repay the money if they left the firm before a certain amount of time.)

OnWallStreet.com:

Over the past year, firms have been getting noticeably tougher in ensuring they collect the departing advisors’ loans. Often times, financial advisors are under the misconception that a member firm will accept a 50% repayment of a promissory note. In reality, member firms are aggressively pursuing payment of the entire principal amount-and then some.

Most promissory notes contain a provision permitting the firm to recoup all interest, costs and attorneys’ fees spent in the collection of the promissory note, and many FINRA arbitration panels will enforce these payments as well.

So, if you are one of those who left before “his time was served,” expect to hear from FINRA, who has set in place some new procedures to speed up the hearing of these cases.

So, if any of this applies to you…READ ON…It’s Payback Time on Promissory Notes.

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What do clients want from their financial advisors in this market turmoil?

Well, what I am hearing is that financial advisors’ phones are ringing off the hooks and that they are actually returning client calls…what do they want and what do they say?

It sounds like most advisors these days are using a “planning” based approach with their clients. Investors are realizing they cannot manage money on their own anymore. They are eager for a plan and direction – good news for wealth management advisors and teams.

They want to talk; they want to hear their advisors talk about their own personal situations; they want empathy and they want to know they are not alone in this mess.

Among other things, they’re looking at accumulation of assets versus distribution and decumulation; good financial advisors are asking the tough questions and forcing their clients to look at their spending habits. (The “quick and easy” fee/commission days are long gone, my friends!)

Today’s investors want safety with some yield and some hope that their “upside down” plans for retirement won’t be in vain! And THAT is a tall order!

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