Two private-equity firms close in on AIG Advisor Group - Investment News
As expected, Private Equity has come in to break the logjam in deal activity for the Broker-Dealer space hopefully ending the paralysis that has set in. Once the price gets fixed on this deal, expect many more to follow setting the stage for widespread industry consolidation as we head towards year end. It will be interesting to watch this along with re-regulation as the entire landscape of the retail financial services business changes.
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Wednesday, July 29, 2009
Monday, July 20, 2009
Finally...a balanced suggestion on reform
Ever since Obama unveiled the Financial Regulatory Reform white paper calling for "harmonizing" B-D and RIA regs to the fiduciary standard, the special interest groups (including the regulators) have been angling and positioning to save their respective turf as is. In fact, the "fee-only" camp has even taken to a "holier than thou" approach just after their primary trade group, NAPFA, had their former president locked up for investment fraud. The link here is the first balanced suggestion I've seen and it makes a fair amount of sense. I'd be curious to hear what you think about it....
What, exactly, does fiduciary really mean? - Investment News
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What, exactly, does fiduciary really mean? - Investment News
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Compensation: SEC mandate called too broad - Investment News
This is the game changer feared by most in the business. At least directionally, this may be where we're headed. Stay tuned....
Compensation: SEC mandate called too broad - Investment News
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Compensation: SEC mandate called too broad - Investment News
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Wednesday, July 8, 2009
The S curve
A concept I was exposed to early in my career was called "The Sigmoid Curve" also known as the S curve, which was developed and coined by European management guru Charles Handy. It is the simple yet profound way to describe personal, professional and organizational growth/decay. It can be ascribed to relationships, careers, product life cycles, company life cycles, etc. Best explained in graphic form, below is an example of the S curve.
As it relates to one's career, it starts out slowly as they take on a new challenge and growth is slow in the "learning curve". But as they gain competence and confidence, a stage of growth begins up the curve. However, the growth plateaus and is at risk of decline if a new S curve is not started to begin the cycle again. The theory is that what was once new and challenging becomes stale and stagnant and a renewal of sorts is needed to begin a new S curve. If properly planned, Handy suggests that you should begin the seeds of a new S curve near the height of the current cycle you're in as illustrated below:
The plan is for you to develop your new career renewal plan while you are cruising along in growth mode so as to avoid ever being pulled into a decline. And if done right, one's career would be a series of S curves (illustrated below)throughout their life...like I said, this is a concept, not necessarily reality.
Obviously the trick is the timing of when to start a new curve since it's counterintuitive to change something when it's going well. What if GM or the Republican party had the foresight to change their old ways to become new again? Don't relationships and marriages get stale needing renewal? When you think about it, the concept can be applied in numerous situations.
Personally, I have had the good fortune to develop career renewal for my entire tenure at AXA-Equitable. For me, each S curve seemed to last for 5 years and then I would take on an new challenge. It was a great 25 years, but at year end 2008, I found myself at the end of an S curve with no opportunity to recreate one within the AXA corporate structure. So the handwriting was on the wall, it is time to start a new S curve elsewhere...haven't started it yet, but getting close.
Another blog that does perhaps a better job explaining the S curve is this one: http://vannevar.blogspot.com/2009/01/riding-sigmoid-curve.html
Where are you on your personal or career S curve?
As it relates to one's career, it starts out slowly as they take on a new challenge and growth is slow in the "learning curve". But as they gain competence and confidence, a stage of growth begins up the curve. However, the growth plateaus and is at risk of decline if a new S curve is not started to begin the cycle again. The theory is that what was once new and challenging becomes stale and stagnant and a renewal of sorts is needed to begin a new S curve. If properly planned, Handy suggests that you should begin the seeds of a new S curve near the height of the current cycle you're in as illustrated below:
The plan is for you to develop your new career renewal plan while you are cruising along in growth mode so as to avoid ever being pulled into a decline. And if done right, one's career would be a series of S curves (illustrated below)throughout their life...like I said, this is a concept, not necessarily reality.
Obviously the trick is the timing of when to start a new curve since it's counterintuitive to change something when it's going well. What if GM or the Republican party had the foresight to change their old ways to become new again? Don't relationships and marriages get stale needing renewal? When you think about it, the concept can be applied in numerous situations.
Personally, I have had the good fortune to develop career renewal for my entire tenure at AXA-Equitable. For me, each S curve seemed to last for 5 years and then I would take on an new challenge. It was a great 25 years, but at year end 2008, I found myself at the end of an S curve with no opportunity to recreate one within the AXA corporate structure. So the handwriting was on the wall, it is time to start a new S curve elsewhere...haven't started it yet, but getting close.
Another blog that does perhaps a better job explaining the S curve is this one: http://vannevar.blogspot.com/2009/01/riding-sigmoid-curve.html
Where are you on your personal or career S curve?
Friday, July 3, 2009
"Whistling Through A Graveyard"
The Financial Regulatory Reform whitepaper released in June has produced some interesting responses from the retail financial services business, depending on which breed of player they are. The business is fragmented to say the least, which is exactly why reform is needed. There are the "holier than thou" fee only advisors who claim to adhere strictly to the fiduciary standard and view themselves not as salespeople, but professionals. This while a full 1/3rd of Ponzi schemes come from the thinly regulated RIA model as the majority of them have given in to the easy money of investment management acting more like sales people than, well...salespeople. They don't want to be lumped together in regulation with salespeople because that would frankly blow their cover. Then there is the non-FINRA registered insurance agent who is so far under the regulatory radar, they aren't even required to give fingerprints to their state regulator in most cases. Selling 12% commission annuities will be tough for these folks to justify in a fiduciary world. Then there is the wirehouse broker who, if not for selling their financial souls for high upfront signing bonuses, would prefer to be somewhere else. Merrill's distribution head was recently quoted saying, "brokers who leave give up a global brand identity"...was he serious? Next are the insurance based broker/dealer brethren who can read the writing on the wall: in a regulatory world holding to a fiduciary standard, the proprietary insurance distribution model has no economic reason for being. Then the Independent B/D's, the vast majority of them lacking the scale, resources and technology to remain in business. With revenue sharing deals likely to go away or at least become less rich, it leaves most financially under water-not a sustainable business model.
Most of us can see that change is coming and that it is much needed. But I'm reminded of the quote, "Our dilemma is that we hate change and love it at the same time; what we want is for things to remain the same, but get better" We want everyone else to change so that we don't have to. But as we know, it doesn't work that way. Everyone is simply "Whistling through a graveyard" knowing change is coming, scared of it, but moving on in the same way not changing a thing.
Here's what we know; the financial crisis and multiple Ponzi schemes uncovered has exposed cracks in the regulatory system, and it is going to change. And the Obama administration set it in motion in June with the blueprint for regulatory reform which clearly states:
The SEC should be permitted to align duties for intermediaries across financial products. Standards of care for all broker-dealers when providing investment advice about securities to retail investors should be raised to the fiduciary standard to align the legal framework with investment advisers. In addition, the SEC should be empowered to examine and ban forms of compensation that encourage intermediaries to put investors into products that are profitable to the intermediary, but are not in the investors’ best interest.
Every financial intermediary and special interest group has its own interpretation of what this means. And their interpretation and argument is, you guessed it, not to change anything wanting everyone else to change so they don't have to; an unlikely scenario. The SEC has been given broad powers here. And the SEC under Mary Shapiro, who has long lobbied for all financial sales/advisors to be regulated under the same regulatory roof, presumably FINRA, will more than likely get their way.
So here we are, playing a giant game of "who's your daddy" . Let's face it, the 900 Lb Gorilla is FINRA. Whether we like it or not, that's where the financial sales and advisory business is headed as regulations are harmonized. It's time we, regardless of which breed of financial services player we represent, stop arguing against inevitable change and start becoming part of the solution in helping mold the new regulations so they don't end up worse that what we've had before. Let's place the focus where it should be, on the consumer and clients, and develop the distribution models and regulations around them.
Most of us can see that change is coming and that it is much needed. But I'm reminded of the quote, "Our dilemma is that we hate change and love it at the same time; what we want is for things to remain the same, but get better" We want everyone else to change so that we don't have to. But as we know, it doesn't work that way. Everyone is simply "Whistling through a graveyard" knowing change is coming, scared of it, but moving on in the same way not changing a thing.
Here's what we know; the financial crisis and multiple Ponzi schemes uncovered has exposed cracks in the regulatory system, and it is going to change. And the Obama administration set it in motion in June with the blueprint for regulatory reform which clearly states:
The SEC should be permitted to align duties for intermediaries across financial products. Standards of care for all broker-dealers when providing investment advice about securities to retail investors should be raised to the fiduciary standard to align the legal framework with investment advisers. In addition, the SEC should be empowered to examine and ban forms of compensation that encourage intermediaries to put investors into products that are profitable to the intermediary, but are not in the investors’ best interest.
Every financial intermediary and special interest group has its own interpretation of what this means. And their interpretation and argument is, you guessed it, not to change anything wanting everyone else to change so they don't have to; an unlikely scenario. The SEC has been given broad powers here. And the SEC under Mary Shapiro, who has long lobbied for all financial sales/advisors to be regulated under the same regulatory roof, presumably FINRA, will more than likely get their way.
So here we are, playing a giant game of "who's your daddy" . Let's face it, the 900 Lb Gorilla is FINRA. Whether we like it or not, that's where the financial sales and advisory business is headed as regulations are harmonized. It's time we, regardless of which breed of financial services player we represent, stop arguing against inevitable change and start becoming part of the solution in helping mold the new regulations so they don't end up worse that what we've had before. Let's place the focus where it should be, on the consumer and clients, and develop the distribution models and regulations around them.
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