For advisors working in today's financial services industry, clear and objective communication with clients is crucially important. The industry has witnessed a changing regulatory environment in the years following the 2008 financial crisis, as policy makers take steps to enact new rules to prevent the recurrence of widespread loan defaults and market illiquidity. Where exactly the incoming Trump administration will net out on the question of regulation remains open for interpretation.
Today's Forecast: Changing Conditions
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the issuing of a modified standard for an "investment advice fiduciary" by the Department of Labor in April 2016 are both examples of new regulations that have influenced the work of many financial advisors and investment professionals nationwide. Moreover, the institutional space has seen an increase in class-action litigation around allegations of excessive retirement plan fees. Examples of this have been prevalent in academia, with cases filed against at least seven American universities, including Yale, Duke, and New York University. At the same time, businesses such as RadioShack Corp., BP plc, and Whole Foods Corp. have defeated lawsuits alleging mismanagement of retirement savings.
Don't Just Know the Route, Light the Way
Although a changing atmosphere can be unsettling, this environment presents an opportunity for financial advisors and investment professionals to reaffirm their mandate to their customers. It is a chance to communicate clearly their intent to serve as a partner in constructing a durable investment approach that is centered on the client's unique long-term financial objectives. Tracey Flaherty, Senior Vice President for Government Relations at Natixis Global Asset Management, recently discussed the changing regulatory environment with Bob Marsh and Larry O'Brien, two principals at OB-C Group, a bipartisan boutique lobbying firm in Washington, DC. Both O'Brien and Marsh agreed that clarity of message on the part of financial service providers is essential.
In light of increased regulation and litigation, Marsh believes "it's important [to] define yourself as customer friendly and keep delivering that message." The Consumer Financial Protection Bureau, adds O'Brien, "shouldn't be viewed as an enemy." He speculates that Trump's strong appeal to voters is based in part on "extremely emotional sentiment" that remains critical of the federal aid provided to banks during the financial crisis. While the Republican Party platform has traditionally favored decreased regulations, O'Brien theorizes that, in Washington today, "political firewalls that have existed in the past for large financial institutions are in some disrepair." Regardless of how a Trump administration chooses to engage with the regulation issue, Marsh and O'Brien agree with Flaherty's assessment that despite the attention garnered by bad actors, "the lion's share of our industry really does what's right for customers." This message remains an important one for financial advisors to carry to their clients.
Informed, Goal-Focused, and Durable
As financial advisors and investment professionals navigate a shifting regulatory terrain, the clarity with which they communicate their value proposition to clients becomes even more important. Furthermore, there is evidence to suggest that clients are more willing than ever to listen. According to the 2016 Natixis Global Survey of Individual Investors, 64% of investors worldwide say professional advice is worth the fee. Seven in ten investors (70%)1 say that investors who work with advisors are more likely to reach their savings and retirement goals. As investment professionals weather a more volatile regulatory environment and the ever-present potential for changing market conditions, fostering a client-first message that clearly communicates a goal-oriented approach over the long term is paramount.
Investment professionals interested in hearing the full discussion between Tracey Flaherty, Bob Marsh, and Larry O'Brien on our Politics and Policy podcast can contact their Natixis representative for exclusive access to the NatixisTalks app. A full report of the 2016 Natixis Global Survey of Individual Investors is available here.
1 Natixis Global Asset Management, Global Survey of Individual Investors, conducted by CoreData Research, February–March 2016. Survey included 7,100 investors from 22 countries.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
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