Financial Opinion and Insights

How The Advice Landscape Is Changing

Jim Lorenzen, CFP®

Jim Lorenzen, CFP®

When I first entered the investment business, it was the traditional way:  I was a stockbroker at a major `wirehouse’ firm.   I went through training in the local branch; then, after passing my Series 7 and 63 exams qualifying me to be a registered representative (that’s what virtually all `stockbrokers’ are), I headed for company training in New York where I sat through daily classes – all of which were really commercials from the company’s various divisions promoting its products to the salesforce.

  • The in-house domestic stock management group taught us about the company’s stock funds.
  • The in-house foreign and global stock management group taught us about their funds.
  • The various bond managers conducted sessions on their various bond funds.
  • The unit investment trust divisions conducted sessions on their various UITs.
  • The money management division conducted session on their various `managed money’ offerings


You get the idea.  It was all in-house products and in-house managers which, in those days at least, could not be transferred to another firm if the investor wanted to leave.  There were no presentations from outside fund companies or product providers; and the term `no-load’ wasn’t even in the vocabulary.

The firm’s national tv commercial campaign touted that their success was measured by their investor’s success using the `one investor at a time’ mantra to stress personal attention.  Of course, when I got back to the office, it was easy to see how success was measured.  All you had to do was go into the `break room’ and look on the wall to see who was winning the contest for a free cruise – and only sales of company products qualified.  Friends of mine who worked for competing firms at the time told me it was no different there.

A lot has changed since those days, at least outside the walls of the major `wirehouse’ firms – I can’t speak for them since I’ve been gone almost two decades and wouldn’t be privy to what’s going on these days – as many `captive’ registered representatives began going `independent’ by opening up their own offices and affiliating with independent broker-dealers who weren’t in the product manufacturing and distribution business.

Over the last ten years even those who were independent RRs began to move away from the product `representative’ business model to a pure advisory model, sparking much controversy about `suitability’ vs. fiduciary practice standards.

Today, middle and retail market investors are now able to access a broad array of investment consulting services through smaller, independent consulting firms – services which are a mirror-image of the scope of services provided to larger institutional investors.  Costs have been dramatically reduced due to the smaller firms ability to operate at lower overheads by outsourcing most of the expensive back-office requirements to larger investment consulting firms that have excess capacity.

This works quite well for all concerned.  The investor now has access to a higher level – institutional level – investment services and advice, while the independent firm can operate under a fiduciary standard with time free to work directly for clients rather than divert time, energy, and resources into back-office operational issues.   Under an independent model, the advisor isn’t ‘captive’ to a single firm’s offerings; but is free to tap the due-diligence services of larger independent investment consulting firms and, through personal planning with clients, arrive at a `best fit’ for their needs without regard to product sales considerations.

As changes continue, the outlook for individual investors benefitting should be outstanding.  Corporate asset managers have realized the benefits for years.  Let’s see if individuals will pick-up on serious asset management best practices or if they’ll continue trying to pick stocks.  Stay tuned.


Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER™  and in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California.   IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained herein should be regarded as tax or legal advice and the reader is urged to seek competent counsel to address those issues.   The above represents the author’s opinion and should not be regarded as investment advice which is provided only to IFG clients upon completion of a formal financial and investment plan.   For questions or comments, you can reach Jim at 805.265.5416 or through the IFG website, http://www.indfin.com.