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Financial Advisor Center
Aaron Levitt Nov 18, 2019
The problem is, there’s so much information available it can sometimes be a bit daunting for the more than 5,000 attendees to take in. Which is where we come in. As part of MutualFunds.com’s coverage of the event, we’ve dug into the conference’s key learnings and pulled out some of the most important pieces of information for you.
With that, here are some of the main themes and knowledge highlights from the event.
Check out our Schwab IMPACT 2019 Channel to catch the highlights from the event.
Schwab’s Managing Director of Digital Advisor Solutions Kartik Srinivasan mentioned some of the key changes for advisors using Schwab’s platform. This included automating many account-related tasks, eliminating paperwork and digitizing portfolio management for items such as tax-loss harvesting and asset allocation. Srinivasan also highlighted that Schwab’s new single sign-on option will allow advisors to not only use Schwab’s applications but a host of other third-party tech products via one login.
Srinivasan’s talk highlighted the general theme of advisor technology at IMPACT. The idea of leveraging technology in a practice is designed to improve efficacy and automate back-office tasks. Aside from providing faster service and producing fewer human-related errors, the general technology for advisors is designed to get them out from behind stacks of paper and in front of clients. Financial advisors can actually once again do more “advising.” Key examples of this from IMPACT was InvestCloud’s Goals-Based Planning applications that help advisors run scenarios for clients’ actual goals as well as Adhesion Wealth Advisors products designed to help outsource portfolio management.
Overall, the idea is that technology can be used to simplify many tasks in a RIA practice.
One of the biggest hurdles for direct indexing – or building custom portfolios of stocks – was that commissions would be high for rebalancing purposes or nearly impossible for smaller investors. Schwab CEO Walt Bettinger talked about this fact at IMPACT when he said “There are barriers to investing: The person starting out saving $100 a month, they can’t have 20% to 25% of their principal taken away for commissions.” But with no fees for this, direct indexing is now a possibility, especially when leveraged with automated portfolio management.
This is true for the second point as well. For smaller to medium investors, the opportunity for efficient tax-loss harvesting wasn’t possible with commissions on sales. Now tax-loss harvesting can be done for any investor.
Throughout IMPACT, the idea that zero-commissions can be used as a vehicle for advisors to go independent was also discussed. There’s no need to be tied to a larger organization as there are now zero barriers to entry.
XY Planning Network founder and blogger Michael Kitces talked about BDs and their moves into the planning space at IMPACT. Kitces showed cause for caution as RIAs are now facing increased competition from BDs and banks as they provide many of the same services. This has shown up in some RIAs seeing lower growth rates. Kitces’ advice was that “generalist” advisors need to specialize and find a competitive niche to provide real value.
Kitces’ view was echoed at IMPACT by JMP Securities who noted that wealth managers, banks and brokerages have realized that there are other avenues to monetize operations besides charging commissions on trades.
This year focused on two major rules from the SEC. This includes Form CSR (consumer relationship summary). Starting next year, the SEC is requiring that advisors and broker-dealers to create a two-page maximum sheet that must be given to retail customers that will highlight fees, conflicts of interest and other information. The key is that is that right now the industry has an unlimited number of pages to make their case. Advisors need to make sure they don’t leave anything out.
The second piece of SEC regulation was new advertising rules designed to modernize the Investment Advisers Act. Thanks to the rise of social media, digital ads and other avenues, the SEC is finally starting to take a hard look at expectations of investors seeking advisory services via new ads.
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