Aussie Déjà Vu

  Beginning in July of next year, commissions will be banned on all investment products being sold and there will be the introduction of a statutory fiduciary duty so financial advisors must act in the best interests of their clients. All compensation must come from the client and not a product manufacturer. There will be complete transparency and each client will know exactly what their costs are and will have to opt back in on the fee arrangement every two years in writing. There will also be a ban on soft dollar benefits (as in 12-B1) to advisors/firms in excess of $300 per benefit. And beginning July of 2013, prospective up-front and trail commissions for pension related products and investments will be prohibited. Sounds pretty radical, right? Not for Aussies. These are the changes being implemented by the regulators as a result of the Future of Financial Advice reforms finalized in 2010.  Read interesting blog post by Aussie here

I just returned from the annual Financial Planning Association (FPA) conference in San Diego where the issues of SRO’s, FINRA and a harmonized fiduciary standard were front and center. And to the FPA leadership’s credit, the major theme was not being divisive by pitting salesmen against advisor or fees against commissions. The focus was simply placing the interests of clients first. It’s all about the process, not the product. They made a point to state that they are model and compensation agnostic and it matters not how one is paid; fee only, commission only or hybrid, so long as the clients best interests were served. I think they hit the mark as most other industry organizations, many to which I respectfully belong, are focused on protecting their primary product and form of compensation.

One of the better breakout sessions was titled “Life without commission-Life without conflict?” organized in a panel of three including a fee only practitioner from the US, a practitioner from the UK and the Director of Advice Based Distribution for AMP from Australia. Like Australia, the UK has been undergoing a new regulatory scheme that seems to change every several years, the most recent being the “Retail Distribution Review” (RDR) issued by their SEC equivalent, the FSA  Read Telegraph article bout RDR here. The RDR will ban advisor commissions beginning in 2013, a move that has many in the UK believing the advisor force will drop by over half when enacted. A movie coming to a theater near you?

The AMP Director had an interesting perspective and one that was a bit of a  déjà vu moment for me. AMP, founded in the late 1800’s and one of Australia’s largest and most respected financial services firms with about 3,000 advisors was recently merged (acquired) by AXA. The Director explained that they made the decision to cut away from commissions and go to 100% fees last year, a full 2 years before the July ‘12 deadline. He went on to explain how they went through an initiative to retrain their field force, move to a financial planning process, change their product set and transition towards fee compensation. It was déjà vu for me because just after the former Equitable, founded in the late 1800’s was rebranded as AXA, I headed an initiative to retrain the field force, move to a financial planning process, change their product set and transition towards fee based compensation Read FP Mag article on the AXA initiative in 2000 here .

The Aussie Directors’ findings were the exact same as mine albeit over a decade ago. While there was a great deal of trepidation about such radical change, what he found is that the clients were far more accepting initially than the advisors. In fact, there were a couple AMP advisors in the room who vouched that after moving from commissions to fees and financial planning that their compensation actually increased, the same that we found a decade ago here in the US with the Financial Planning initiative. While we rolled out the initiative nationally with some success, it eventually ended up dying as a necessary expense cut, not because of its viability as a strategy, but because fees were inconsistent with the primary form of profitability for the firm, namely selling commission based insurance and annuities manufactured by the mother firm. Had there been a gun to our head with new regulations as are taking place in Australia and the UK, I’m certain AXA-US would be a full decade into a successful transformation. But instead they have digressed back into a proprietary product manufacturing driven distribution platform facing a potential gun to the head event with new regulations on the horizon. (With most sincere apologies to my former AXA colleagues…just calling it the way I see it)

A recent CNBC poll showed how Australians are most optimistic about their financial futures while here in the US, I don’t recall there being a time with more uncertainty.  CNBC poll article here . One wonders if the confusion and regulatory uncertainty is lending to the American angst. Do the Australian regulators have it right by moving retail distribution to fee only? Time will tell. Will the US follow suit and move towards a similar set of regulations? I think the chances are far greater that we trend in their direction than they towards ours. AMP is to be commended for taking the leap towards financial planning and fees well before it was required. Will any of the large retail distribution firms in the US have enough vision and motivation to do the same? I can say that in a different time with different leadership, at AXA Advisors we made it work. But today it has yet to be seen, even with the proverbial gun to the industry business models heads. Time will tell.

Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. ~John Kenneth Galbraith

Not until we are lost do we begin to understand ourselves. ~Henry David Thoreau

Life is a balancing act-my 9/11 life lesson

Sometimes in tragedy we find our life's purpose - the eye sheds a tear to find its focus. ~Robert Brault

We're approaching the 10^th anniversary of the 9/11 attacks and are sure to relive those events at this milestone through multiple mediums, this one included. Those who know me well wouldn’t exactly describe me as an “open book” as I seldom disclose personal information publically and tend to be “all business” and buttoned up to the outside world. But since this is a web log (blog) and the 9/11 anniversary is weighing on many people’s minds, mine included, I thought I’d tell my story with perhaps more personal info than you really care to hear about. I promise there is a business moral to my story that I hope will resonate if you can read that far.

Throughout my career I’ve always been a fierce competitor and goal setter placing major goals into 5 year segments. Starting my Financial Services career at age 25, my first goal was to be a branch manager by age 30; check…then million net worth by 35; check…then earn 7 figures annually by 40; check…then be Pres./CEO of a financial services company by age 45. I was the consummate workaholic as the first one in and the last one out even working both Saturdays and Sundays. Vacations?... The company conferences would cover that, right? Balance?...That’s for wussies, so I thought. In Feb of 2000, the financial editor of the Dallas Morning News wrote an article about me in the business section of the Sunday paper telling my story. One line in the article states, “He’s enjoyed a rather charmed life with just enough challenge to make his story believable”. But frankly, I really hadn’t endured much challenge at all up to that point…Then came the unbelievable events of 9/11/01.

In August of 2001, I had achieved my latest 5 year goal being offered the role of President and CEO of AXA Advisors, LLC based in New York City by age 42, earlier than my plan called for; check. A requisite for accepting the role was to relocate my family from Dallas to the NYC area by year end. So wife Cindy (now ex), and I spent Labor Day week house hunting while I was to start my first day in the role on Monday, 9/10/01.  The morning of 9/11, I said goodbye to her as she was heading to Dallas from LaGuardia on a morning flight to get back to our 5 year old triplets being watched by my Mom while we were gone. It was a perfect fall day in New York City with crystal clear blue skies, pleasant temps and light winds. I recall thinking that even for the country’s worst “on time” airport, even LaGuardia couldn’t screw up this perfect day and the flight was sure to be a smooth one. Then, in the 9:00am hour, just like all times when you remember exactly where you were and what you were doing when a tragedy occurs, I was holding a meeting in a conference room and our head of marketing came charging into the room saying, “you have to see this on CNN…one of the twin towers is on fire”.  No one really knew what was going on, but everyone suspended whatever they were doing to watch the news. Then it was reported that an accident had occurred in first tower. At this point, I was still thinking it was a fire since it wasn’t in the realm of anyone’s reality that a plane would purposely fly into a building. Cindy made it across the bridge just before it was closed en route to LGA looking back at Manhattan and seeing the initial destruction without really knowing what had occurred. I tried to call her cell phone, but nothing would go through as all the lines were jammed. As the morning unfolded, panic began to set in. My office was in Rockefeller Center and we would hear fighter jets patrolling the city skies as we were all wondering if our area would be hit next. Once everyone comprehended what had just actually happened, the fight or flight instinct kicked in and needless to say, everyone was running for the exits as fear took hold. It was like something out of the terror movies you see like in “War of the Worlds” with panic and anxiety everywhere. I was in mid-town and can only imagine what those who were around ground zero were experiencing.

Cindy had just checked her bags at the curb and then found out that the airport had been closed. This was a time before smartphones, texts and twitter, so those at the airport were busy traveling not really knowing what was going on. But word traveled fast and like in the city, everyone made a run for the exits once they learned what had happened. She was at the curb, alone without luggage obviously looking helpless and then a limo pulls up, the back door opens and a man motions for her to get in. It happened to the comic/writer Harold Ramis and his wife simply offering a hand to someone in need. I guess Cindy was subconsciously thinking that if Ramis could save New York City from the bad guys as a Ghostbuster, he was a safe bet to be with on a day like this. So she got in and they just started driving out of the NYC area headed north with no real destination in mind.

The robbed that smiles, steals something from the thief. ~William Shakespeare, Othello

Meanwhile, I was still in midtown making sure everyone got out of the building. I was among the last exec’s to leave the mid-town building along with our CFO, Stan Tulin. We got into his car and he barked orders at his poor driver to head to his home in Greenwich, Connecticut. It was bumper to bumper and we took every shortcut possible to get out ASAP. While I was still unable to reach Cindy by cell, I was able to call my Mom in Dallas. I found out that she had also heard from Cindy and she was okay. So we used my Mom in Dallas as “mission control” to communicate back and forth and got instructions to them to meet in Greenwich. Later in the evening we made it to Stan’s home which was set right on the shore of Long Island sound. Within the hour, Ramis, his wife and Cindy arrived. Stan grabbed one of the best bottles of wine from the cellar (he has quite a collection) and we sat outside on this beautiful but disastrous day sipping wine and recollecting in shock what had just happened. The Long Island Sound was extremely quiet and glass like…no boats, trains, cars or aircraft that are usually buzzing in the background...extremely serene and very eerie considering the day’s events. Then, as our conversation drifted into Middle East politics searching for reasons to explain away what had happened, Ramis apparently fashioned himself as somewhat of an expert on the topic expressing a fairly liberal (hey…he’s an actor) view of the landscape. But he had met his match as Stan went on to verbally slice his remarks to pieces with facts that left even a comic actor speechless. It was fun to watch.

Anyway, Stan offered for them to stay, but they were adamant about getting back to Chicago and planned to drive all night to get there. Stan and his wife Ricki were very kind to host us as we had no place to go and all air travel was suspended. A few days later, we were fortunate to secure one of the first aircraft (private jet) out of White Plains airport back to Love Field in Dallas. And while a month later there was another attempt at house hunting, it ended with the fear of the anthrax scare that captured the city at the time. My story pales in comparison to those who lost their friends and family members at ground zero, on flight 93 and at the Pentagon. But it was a defining time in many lives, regardless of where they were that day, mine included.  

I don't like people who have never fallen or stumbled. Their virtue is lifeless and it isn't of much value. Life hasn't revealed its beauty to them. ~Boris Pasternak

I had enjoyed somewhat of a charmed life up to that point and then on the first week in my dream job, 9/11 hits and changes everything. Cindy’s world was obviously rocked by the events as well and she beared down and refused to relocate. So after living in the Midtown Hilton for months, I broke down and leased an apartment on the Upper East Side while commuting out of NYC to DFW every Friday night and back again on Sunday night for the next several years. I would spend over 12 hours door to door every weekend on my commute, not to mention other travel during the week under post 9/11 restricted and delayed travel conditions…not exactly the glamorous lifestyle one would otherwise imagine. American Airlines personnel knew me on a first name basis while I was wondering if my own kids would recognize me. But I had basically chalked it up to just something a good soldier has to do given the cards dealt and figured that I would be the best weekend Dad I could be and focus the rest of the time on my career while placing the marriage on hold for a later time. But the now ex-wife saw it differently. The tragic events caused her to reevaluate her own life and after a few years seeing her minimally, she decided to make it permanent and wrote me out of her life script. I recall talking to Bob McCann formerly of Merrill and now at UBS, when he had a short stint as Vice Chair at AXA. He said, “John, you just don’t know how to quit, do you?” He was right. Kip Condron, CEO of parent AXA Financial, accommodated my situation (for which I am very grateful) and allowed me to basically fire myself and rehire myself in a placeholder role in Dallas that I could do while I took care of personal business, or to put it another way, rebalance my life. And in true form, I remained in that role for exactly 5 years and then decided it was time to pursue the next career chapter after the “great recession” hit.

Adversity has the effect of eliciting talents which, in prosperous circumstances, would have lain dormant. ~Horace

This brings me to “the moral of the story”. You’ve probably heard of the “Whole Person Concept” where one’s life should be in perfect balance like a square with equal time and attention paid to each important quadrant shown here. If you spend too much time on one, it throws the others off balance and something eventually gives. While I stayed in pretty good shape physically and had myself covered on the spiritual side, my career was clearly overshadowing all of them, most impacted being family. Over time, something has to give if you’re totally out of balance. 9/11 wasn’t the cause, but the catalyst to expose my long standing weakness here. I’m a bit hard headed and it took a national tragedy and personal setback to realize I had to change. The good news is that I have since remarried “the one” in my life (Dianne), have had the time to be front and center for the now high school aged triplets who are thriving, am in the best physical shape of my life and am positioned to start a new career growth S curve with a wealth of experience and a new healthy outlook. Despite the rocky economy and a relatively uncertain future, I am about as happy as a person can get. It’s kind of strange that I was so tightly wound as a young professional that I actually acted older than I do now. I guess you call this maturity and wisdom.

My goal orientation has not changed, but perhaps what I value most has.  And for those who may think Lefferts has gone soft, forget about it. What I’ve found is that living life in balance gives you the ability to see things more clearly and deal from a position of strength. The competitive fire is there like ever before, but it burns more efficiently with far more lasting power. I probably still won’t be outworked, but it will never come at the expense of the other important facets of a balanced life. So, while all my prior 5 year goals were career/financial related, the last 5 have been on all the other quadrants.  A life in balance…check! 


“Now, we have inscribed a new memory alongside those others. It’s a memory of tragedy and shock, of loss and mourning. But not only of loss and mourning. It’s also a memory of bravery and self-sacrifice, and the love that lays down its life for a friend–even a friend whose name it never knew. “
- President George W. Bush