By
San Diego
Financial industry experts who spoke here at the Financial Planning Associations 2000 Broker-Dealer Conference were worrying about the clouds that might be lurking behind the current economy's silver lining.
Two years ago, speakers at a broker-dealer conference hosted by the International Association for Financial Planning predicted deregulation of the financial services industries and fierce competition from banks, insurers and giant Wall Street brokerage firms would drive the smaller brokerage firms out of business.
Concerns about the effects of deregulation helped bring about the formation of the FPA, by spurring the merger of the Atlanta-based IAFP with the Denver-based Institute of Certified Financial Planners.
This year, in spite of the forecasts of ruin, "you seem to be prospering quite well," Robert Clark, editor-in-chief of Dow Jones Investment Advisor, told conference participants.
Inflation has been low, the major U.S. stock indices have been high and most investors have been happy. The giant New York wirehouses have been promoting programs to make their sales representatives act more like independent financial advisers.
Nevertheless, as good as conditions might be, "you know the shoe is bound to drop sooner or later," Mr. Clark said.
An audience member at one conference session suggested the independent firms size might give them a permanent edge over the wirehouses. "Were smaller," the executive said. "Were more agile. Were like the little mammals that go around eating the dinosaurs eggs."
But Mark Hurley, president of Undiscovered Managers L.L.C., a Dallas mutual fund company, said the small advisory firms are now in the same position that the small money management firms were in 20 years ago. The money managers had to choose between finding a niche or finding the capital to become mutual fund companies, he said, and advisory firms now face a similar choice between specialization and expansion.
Advisory firm owners that fail to choose will end up working harder and earning less, he predicted.
Some panelists suggested intelligent use of technology could help the small firms stay in the game.
The National Securities Clearing Corp., New York, for example, is continuing to improve its broker-dealer-friendly system for clearing variable annuities, according to Angela Pearson, the services manager for independent broker-dealer relations.
But Larry Papike, president of Cross Search, an El Cajon, Calif., executive placement firm, said owners of the independent firms still have to find the time and energy to pay attention to management basics, such as answering questions from sales reps.
"Some broker-dealers dont even return calls from the field for three or four days," he reported.
Reproduced from National Underwriter Life & Health/Financial Services Edition, February 7, 2000. Copyright 2000 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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