A financial advisor who started his career more than 40 years ago wrote a book about how the planning profession changed over that time and the need for further shifts in the future.
Drew Tignanelli, founder of Hunt Valley, Maryland-based
Tignanelli's career path — from starting at a forerunner of Ameriprise and later with Raymond James to launching a fee-only RIA in the '90s and joining the
"Personal finance became far more complicated than it had ever been," Tignanelli said, citing the nuances of tax rules and increasing burdens on advisors from new regulation. "If somebody's going to tell the public that, 'I'm a financial advisor,' there's got to be far more that they do to educate themselves and get experience. … If you want a financial advisor, somebody who's going to objectively look at your situation and help you, that person should be like a doctor."
In the past six years, the number of RIAs registered with the Securities and Exchange Commission jumped by more than 20% to a new high of 15,114 firms, while the number of brokerages has fallen by 9% to 3,378,
"The shift toward investment advisory firms and [RIA] representatives has resulted from investors increasingly seeing the value of the fiduciary advice offered by [RIAs]," the report said.
To Tignanelli and other fiduciary practitioners, their duty to put clients first at all times represents the industry's most important distinction in that brokers and the firms they represent only must make recommendations according to a murkier standard defined as a customer's "best interest." Even as some RIAs have
"Drew entered this industry the way most advisors have, in a salesperson-driven environment where product producers are more concerned with who you know than what you know," Michael McCarthy, the CEO of Tignanelli's firm, said in a letter the firm sent with a media review copy of the book. Tignanelli's book "tells the story of seeing the industry from the inside and realizing it was broken and there had to be a better way," McCarthy added.
One such lesson came early in Tignanelli's career, when he wrote that his first company "slapped the 'financial advisor' title on me" after only two weeks of training. After a decade or so in the field, he was still getting jabs from his father and his brothers — who are lawyers — about being "a lowly salesman," he said. And he came home from one of his international trips for the top producers with his brokerage in the early '90s realizing that "our clients pay for these trips," Tignanelli recalled.
"The financial industry's very culture fights against allowing their reps the time and resources to become doctors of finance, dedicated to their clients' financial well-being," he wrote in the author's note to the book. "Instead, the industry standard is to hire good salespeople."
For Tignanelli, the solution lies in some form of government recognition of advisors' title, requirements for lengthy study and residency and more paths into the profession directly to RIAs rather than traditional brokerage training programs. He praised the CFP Board for updating its standards in 2019 to
"It's a reasonable definition of 'fiduciary,' and thank God that they've done that," Tignanelli said. "That's a good step forward, but it isn't a court's definition of a fiduciary."
Interestingly, the insistence on putting a client's interest first has led to the gigantic expansion of RIAs as advisors and their customers keep migrating from wirehouses and other brokerages to the channel. Over the last 22 years, the assets under management at RIAs has climbed nearly sixfold to more than $114 trillion, according to the industry snapshot.
Tignanelli, 65, still works more than 50 hours per week and more in tax season as the firm's chairman. Every Wednesday night at 6 p.m. he hosts a radio show called "
"We took a 50% revenue cut in 1995 when we left the brokerage industry and went fee-only," Tignanelli said. "Within a year, our revenue went up by over 150%. Because of the new model that we were using, people flocked to us."
