For this special section, Bank Stars on the Rise, we asked our young nominees several questions to help gauge our decisions. One question that generated some interesting replies focused on the parts of their jobs that they felt were new. That is, something that earlier generations did not have to contend with. (We asked that they exclude technology, which is constantly changing in nearly every industry.)
Several replied that with the deluge of financial information today, there are many more do-it-yourself investors than ever before. True, that's a major difference, although it sounds awfully close to a technology answer. Same with robos, which are indeed a phenomenon that older advisers didn’t deal with when they began their careers.
It was the type of question that doesn’t have one right answer in a watershed moment as we are seeing today with a confluence of new trends, any one of which could fundamentally change the industry. Still, I feel the fiduciary rule may be the best answer. Granted, it’s not sexy, like robos, but it is one of the few truly new issues in an industry where many seem to be “evergreens.” And it is indeed turning your industry on its head.
In fact, these two trends combined, the fiduciary rule and robos, create a force that previous generations of bank advisers could never have foreseen. As such, the youngest advisers are facing an entirely different job from their predecessors.
One advantage the rookies have is that this will be the only industry they know so they won’t carry the extra baggage of comparisons to yesteryear. But there’s an offsetting negative: the smallest clients, the ones that many young advisers start theirs books with, are the ones who will be the toughest to serve in the fiduciary world. They also are the ones who are likely to be lured by a robo option.
The next obvious question regarding the new rule is about enforcement. Who will see to it that advisers fulfill their duty, and who will punish the wrongdoers? It’s not the Department of Labor; it’s plaintiffs' attorneys. This is also something your older colleagues never faced, and it has many of your banks and compliance officers scared. If there were one agency cracking down, at least there would probably be some consistency. But with the courts essentially acting as enforcers, there could be different decisions from different jurisdictions. And if these decisions were to go a jury, punishments could be punitive.
The smallest clients, the ones that many young advisers start theirs books with, are the ones who will be the toughest to serve in the fiduciary world. They also are the ones who are likely to be lured by a robo option.
Why do I mention all this in a section that is supposed to celebrate the young stars of the industry? It’s not to rain on their parade. It’s to share my experience as someone who’s watched the banking industry for a decade (and seen my own industry upended by technology, as well.) New skills are needed in any changing corporate environment. So is an open mind.
A phrase that’s tossed around a lot by bank programs is “culture change.” That’s what’s needed to handle all the changes. Maybe, but real culture change takes a very long time. Years sometimes, and even then it's not always successful. Banks don’t have years in this case. At this point, they have weeks.
To be sure, there is talk of the fiduciary rule getting postponed or even eliminated. But most banks have begun the painful, expensive steps toward compliance and will be loath to do an about-face now. If they do, you may have only to deal with robos for now.
But even if that’s the case, heed two points. Technology by itself can easily disrupt an industry, it doesn’t necessarily need new regulation to boot. Moreover, the rule could easily come back. A month later, maybe a year, or maybe even under the next President. Regardless of when, advisers should strive for the ideals of a fiduciary standard. And if the rule is postponed and you surpass the legal minimum required for now, you can then use that to set yourself apart and take your practice to a new level.
