As in Nature, the “Fittest” Will Survive—and Thrive
The financial services industry is changing, and the advisors who adapt will enjoy a huge advantage. Some of the changes are driven by regulation, like Regulation Best Interest and Dodd-Frank, while others are the result of competitive forces. Both new regulations and competition are absolutely good for the American family, and it’s the wise advisor who will embrace the new reality and build a value proposition that will not only win but reward them with top-tier income and elite-level practice value.
Fifty years ago, stockbrokers made cold calls, armed with hot stock ideas. Thirty years ago, brokers hooked up with a mutual fund that was killing it and hawked that. This was when salesmanship was all, and a sale was closed with urgency and persuasion. The day that first trade went off, the broker started thinking about the next idea to turn over the account.
The Consumer Protection Act and the proliferation of cell phones pretty much killed cold calling, which, in reality, was never a productive way to build a book of business. And, let’s be real: there were enough “hot” ideas that turned out badly that stockbrokers came to be regarded the same way used car salesmen were. Consumers came to believe that the broker would get a win no matter what happened to them.
Commodification of trading dealt the old school another big blow. Although it took quite a while, the SEC’s “May Day” mandate in 1975 eventually killed the incentive to work on commissions. Before then, a $10,000 trade earned the broker $100—which in 2025 dollars would be worth $587. In today’s world, that number is often zero. Competition, by its nature, shrinks profits, but it also finds new opportunities.
The Long View Benefits Client and Advisor
When was the last time someone introduced themselves to you as a stockbroker? Even 50 years ago, stockbrokers were beginning to call themselves “account executives.” Today, we use the term financial advisor. More importantly, the motivation has shifted from making a quick sale to delivering satisfying long-term outcomes. That’s great for the consumer and can also be great for the modern advisor, who can develop and nurture a book of business that is reliable, stable, loyal, and very valuable.
Seasoned advisors have discovered an old truth: if you live by the sword, you die by the sword. Put into terms advisors understand, this means that if you live by performance, you die by performance. The number of advisors who have consistently delivered above-market, risk-adjusted returns over many years is vanishingly small. It may even be zero.
Modern advisors are rejecting selling outperformance in favor of the fiduciary standard. They’ve learned that solutions that are in the best interests of their clients, first and foremost, are the best path to a more satisfying and successful career.
Advisor’s Alpha is a term and concept developed by Vanguard that refers to the added value financial advisors provide beyond just investment returns. Instead of simply picking stocks or funds, Advisor’s Alpha quantifies the impact of strategic planning, behavioral coaching, tax efficiency, and portfolio management in generating higher net returns for clients. Vanguard has found that Advisor’s Alpha can generate 3% or more per year to a client’s compounding.
Three percent alpha is a tremendous amount, and it has a force multiplier. By providing wise counsel and operational efficiencies, an advisor can deliver 50% greater net return, or more, without taking additional portfolio risk. Better risk-adjusted returns is the holy grail. This concept of Advisor’s Alpha has been the most significant development in the financial services industry since 1924, when the first mutual fund was distributed.
But Wait, There’s More
Adding value to portfolio design and management can help an advisor win and retain a great book of business, but every advisor knows that stocks and bonds are only part of a family’s financial needs. There is also insurance, tax planning, and, for some of the wealthier ones, estate planning
The advisor who can extend their advice across all of these needs can bring their client the benefits of the family office model, the overwhelming choice of the richest families. Bringing that kind of decision-making framework to the table and working cooperatively with subject matter experts gives the advisor a virtually unbreakable relationship with the client and access to multiple new streams of revenue.
The sweet spot of the market for most advisors, the mass affluent and affluent cohorts, is getting a lot smarter about their money. Here’s a statistic from Riaintel.com that proves this point: the percentage of affluent investors willing to pay for financial advice increased from 36% in 2009 to 64% in 2023.
Millions of families have come to understand the value of advice. Imagine the market potential for advisors who can provide holistic advice built around the unique needs of every client family. That would be about as far from a cold-calling tipster as it is possible to be and could put the advisor among the top one or two percent of all earners in the game.
We’ve all seen those “descent of man” images where a monkey evolves, step by step, into a modern human. In our industry and this modern world, the most evolved species of advisor is the family office director. When there is zero conflict between FOD and client, both parties can achieve a level of maximum satisfaction.
There is no reason for today’s advisors to lament new regulations and more discerning clients. Quite the opposite: there is every reason to believe that democratizing the family office is the surest path to a satisfying and successful career.
Financial Gravity’s Turnkey Multi-Family Office Charter is a comprehensive advisor support platform that empowers advisors to offer the family office model to their clients. In addition, our Done For You advisor and client support model is a revolution in advisor productivity.
