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Future of Wealth Management

In the last 12 months, I have had many conversations about the future of wealth management.  The values of Pure Portfolios express our views of where we think the business is headed i.e. hybrid model, cutting edge technology, anti-sales culture, fees tied to performance (downside only, no upside capture), and lower ‘all-in’ cost of investing.  The old guard might disagree with us, but investors are demanding more from their investment managers.

The CFA Institute teamed with Edelman on an insightful piece: ‘From Trust to Loyalty: What Investors Want’.  There are many misconceptions about what is important to clients.  Wealth managers try to distract clients with sporting events, mixers, and dinners to solidify the relationship or capture additional assets.  The bottom line is retail investors consider investment costs, ethical standards, performance, and client service when choosing and retaining a wealth manager.

Unfortunately for investors, what’s important to them misaligns with their investment manager/financial advisor.  Most advisors are concerned with their own compensation payout grid and maximizing their income.  The firms that employ advisors are concerned with maximizing revenue and cross selling (Wells Fargo).  There are misaligned incentive structures for client facing associates at publicly traded firms.  You can’t say you’re a fiduciary when a list of product sales goals guides your conduct and recommendations.


The bottom line is advisors that work against clients are currently being exposed for what they are: salespeople that are a walking conflict of interest.  There will no longer be a place for them to hide in the investment industry.  A recent Fidelity survey shows 28% of advisors are either planning to quit/retire or reconsidering their careers as advisors due to the upcoming Fiduciary Rule.  How absurd is that?  The advisors can no longer make a lucrative living fleecing the people that depend on them so they’re quitting?  Good riddance.  The industry and clients you serve will be better off.  Pure Portfolios, Betterment, and Vanguard will gladly provide high quality service at a reasonable cost.

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