In FundFire’s recent survey of industry participants, the highest percentage of respondents indicated that they felt that revenue-sharing agreements – or the amount of money that fund companies pay to sponsors for promotion and support – were the most important determinant of whether or not a fund company gets on that sponsors platform. In other words – pay for play.

Investment philosophy came in as the second most popular answer, followed by the wholesaler’s relationship with the gate keepers. Why might this answer be bad for wirehouses?

The answer is that it indicates that the perception is that money speaks louder than anything; if true, this phenomenon hurts smaller mutual fund companies that don’t have the financial resources to compete. It would also limit client and advisor choice.

I say perception because while I agree this might have been the best answer a few years ago, I would agree with the management of wirehouses who would dispute this is still the case in today’s market. Especially following a large settlement a number of years ago against Edward Jones, the wirehouses have been reluctant to let revenue-sharing dictate their actions.

But since perception is reality, this type of issue, if publicized further, would be another black eye for the wirehouses. In the midst of the continued debate over the fiduciary standard, perceptions such as this become reality if used by RIAs and others who compete with the wirehouses; these competitors would argue that not only are wirehouse advisors not held to the fiduciary standard, but their firms limit their product offerings due to monetary issues, with the loser being the client.

My advice to the wirehouses is that this issue should be added to the list of perceptions that need to be proactively addressed head-on so that their advisors can compete.

Today, the financial services industry is losing the external public relations war (wall street v. main street). The wirehouses are losing the internal war to the independents. The war is far from over and the wirehouses will survive. But the sooner they start getting their case heard, the better off they will be.

This battle has been raging for a number of years now, and is apt to continue. An article in today’s RIABiz caught my eye, as it recaps a study which cited that the trend of wirehouse advisors going independent may slow as the recent mergers among the largest wirehouses start to show positive synergies. It also mentioned that many wirehouses are beginning to devise ways to allow advisors to operate more independently within their structures. All good points – but as important to this trend – and its future direction –  is not only the firms themselves, but the characteristics of the advisors.

It is natural that the trend toward advisors becoming independent will ebb and flow. Certainly the financial crisis hurt wirehouses, as the reputation of many – UBS for example – were tarnished. What has been the cache of working for a firm that was well known became a negative. The “shotgun” marriage of Bank of America and ML, and the subsequent fallout didn’t do much to help wirehouses either. And the Morgan Stanley/Citi partnership has been slow to develop.

But as the article pointed out, advisors view their book as an annuity and they are going to do whatever is necessary to protect their business and their future. Wirehouses are not going to go away – they will adapt just as banks may have to again after financial reform is passed.

Another important consideration that is often overlooked, however, is that going independent turns an advisor into a business owner overnight. To me, this is the biggest issue that will determine whether an advisor or advisor group considers going independent or not if they decide that their current home is not the best place for them. I know many wirehouse advisors that would consider moving – but only to a similar firm (or to a firm that is up and running) because they don’t want the hassles of running a business.

There is a trade-off that must be made when the decision is made to switch firms. Wirehouses may become a great place to work again as the mergers work themselves out. But at the crux of the issue is whether or not an advisor can truly function in an independent environment or is more comfortable at a firm where many of the services are provided for him.

OK – so the market is back down, the news from abroad is depressing, and it’s getting harder and harder to feel optimistic (despite the arrival of summer). So, what should you do? Here are some ideas to help you survive the day(s):

10 – Call your clients – now is the time to be proactive; if clients have to call you on days like we’ve had, you’re putting yourself way behind the eight ball;

9 – Exude confidence with your clients – clients are paying you to keep them calm during turbulent times – they are not paying you to commiserate with them;

8 – Have some value-added information to share with your clients – whether internal reports or forecasts, or external, show clients that you are taking the time to keep on top of things and that you do have a viewpoint;

7 – Call your clients – oh, did I already say that? Well – that’s because it’s the most important thing that you can do right now;

6 – Continue to execute your overall growth strategy – while it’s hard to think about the future during difficult market times, especially when you are seeing both you and your clients accounts drop in value, now is not the time to change course;

5 – Spend money to make money – your need to continue to invest in your business and not put off expenditures until things get better – you know that things will get better eventually – they always do;

4 – Rev up your marketing activities – winners and losers always emerge from market turmoil – the clients of all of those advisors who are not calling, and are hiding under the table , will be looking for new advisors at some point;

3 – Take the time to ensure that your value proposition and mission statement are strong and truly reflect why you are better than the competition;

2 – Make sure that your communications prominently display your value proposition and mission statement so that clients and prospects never forget why you are the best; and

1 – Take a deep breath – this too shall pass.

No – it’s not the word you’re thinking. The F word referred to here is Fiduciary. I was just at a conference sponsored by Fi360, an organization which provides fiduciary education and practice management training to the financial services industry (www.fi360.com).

This is a phrase that I heard – it is actually being promoted by The Committee for the Fiduciary Standard. You can gather from it that both organizations support the fiduciary standard for all industry participants (the current debate revolves around the broker/dealer world, where advisors are not held to this standard, and the RIA world where advisors are held to this standard).

Simply put, in the broker/dealer world (e.g., wirehouses), advisors are held to a suitability standard – know your client – is a given recommendation suitable for the client? The standard in the RIA world is higher – these advisors are held to a fiduciary standard – essentially, what would an expert in this area do in this situation?

It is unclear whether regulatory reform will mandate the fiduciary standard for all, but at this point it seems unlikely. Both sides have powerful lobbies and this issue is sure to rage on.

Interestingly, there were many wirehouse advisors at this conference and there are many that are members of Fi360 and have earned their AIF (Accredited Investment Fiduciary) designation. As this debate continues, I still believe that the key for any client is not where their advisor resides (wirehouse v. RIA), but rather what he/she has done to educate him/herself and what they do in their practice to help add value to their clients.

I have said it before and I will say it again – hiring an RIA who is held to the fiduciary standard does not guarantee the client that they will be satisfied any more than hiring a wirehouse advisor will assure dissatisfaction.

Until our regulatory agencies prove better at enforcement, the individual client is best served by doing extensive due diligence on their advisor or on advisor candidates regardless of which standard they are held to.

One of the most confusing things for many investors is understanding the fees that they are being charged on their investments. Especially when comparing various investment options, it is important that investors feel comfortable that they able to make an “apples” to “apples” comparison.

We have just written a new White Paper entitled The Truth About Fees  to help educate investors on fees in three of today’s common fee arrangements – commission accounts, working with a “fee-only” advisor or planner and “wrap-fee” accounts. We hope that you find this paper useful; feel free to pass it along to anyone else whom you feel would benefit from it.