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New fiduciary world: Why wirehouses want to 'look like you'

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SAN DIEGO - The law hasn't even taken effect yet, but the dramatic shift in the advisory industry that will be wrought by the fiduciary rule dominated Tuesday's keynote session at the Schwab Impact conference.

"Some of the traditional firms are beginning to look more and more like you," Schwab CEO Walt Bettinger told more than 2,000 independent advisers at the annual event, the industry's biggest.

"If you're a successful broker at a firm, and the firm is pushing you more and more to look like an independent adviser, why not just become an independent?" Bettinger asked. "The end result is that the entire industry might look like this one," he told the crowd.

"Wirehouses strive as much as they can to look like you," he continued. "The challenge of next 20 years will be: How do we 'redifferentiate' ourselves from those who look to [benefit] from your successes?"

After all, he noted, "The whole investing world is headed toward transparency, toward a fiduciary expectation."

In an onstage conversation with Bernie Clark, Schwab's executive vice president for adviser services, the two stood sat on stools in front of a massive screen that outlined 11 main points on their thinking about where the advisory world is headed.

Among them:

  • Brokers turning independent will fuel continued outsize growth in registered investment advisers. "The competitive environment is going to get much, much greater," Bettinger said. "In our business, transactions are under tremendous pressure."
  • Relationships and planning versus out-performance will fuel success. "We grew up, many of us, in the trust-me, trade era," Clark said. "This next generation, that's not the future they want. They want to know you care about them." Client conversations that lay out a "roadmap with them will go miles," he added.
  • Investment advice will increasingly trend toward a mix of technology and live professionals. "It's going to be different," Clark said. "In technology, how do you bring the balance of technology and human touch into your firms?"
  • Fee awareness and fiduciary expectations are here to stay. "For the future, it has to be so much more than, 'We'll beat the market,' " Bettinger said.
  • Higher interest rates will intensify transactional price competition. "Higher interest rates will intensify," Bettinger emphasized, and that, along with several other factors, "will ultimately [be] good for the consumer."
  • Scale will play an increasingly large role in determining the winners. "There is economic pressure, and driving scale and efficiency are going to be critically important for you," Clark said.
  • Brand loyalty is more transient than ever. "The world has changed so much when it comes to brand. When I was a youth," Bettinger said, "you could buy your way into the cultural conversation if you were simply willing to spend enough on advertising. Today, it's completely different. ... It's not what you say about yourself. It's what others say about you."
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