This news service talks to Skip Schweiss, the new president of the Financial Planning Association. He's not worried that a Big Tech player such as Amazon will enter the financial services market.

What’s next for the financial planning and advisory profession?

Independent advisory firms will get larger, but don’t expect a true national brand anytime soon. Oh, and the disruption that advisors fear with the inevitable entry of Big Tech giants like Google and Amazon into financial services? You can put that on hold as well.

“Financial planning has been a cottage industry for a long time, and there are still many small firms which are thriving,” said Skip Schweiss, the new president of the Financial Planning Association. “But now we’re seeing more institutionalization, starting with the wirehouses, who are offering more financial planning and fee-compensated advice.”

And while the furious pace of mergers and acquisitions among independent advisory firms has ensured the rise of larger and larger RIAs, sometimes called ‘meta-firms,’ such as Hightower, Mercer Advisors and Captrust, Schweiss is doubtful that an actual national brand will emerge in the near future.

“I’ve worked for Fortune 500 companies and it takes hundreds of millions of dollars in media and marketing to make and maintain a national brand,” Schweiss, the former president of TD Ameritrade Trust Company, said in a wide-ranging interview with Family Wealth Report that also touched on prospects for the profession, regulation and the future of the FPA itself. “I just don’t think that’s in the budgets of those RIAs,”

Nor is he worried, despite many predictions to the contrary, that a Big Tech powerhouse like Google parent company Alphabet or Amazon will enter the financial services market.

“Financial services is heavily regulated, and those firms are having government oversight issues of their own right now,” Schweiss said. “I’m hard-pressed to see what their business model would be.”

Eye on Goldman
One prominent company Schweiss is keeping his eye on: Goldman Sachs. The venerable Wall Street firm is “very serious” about building up its new RIA custody business, he noted, and integrating Joe Duran’s former United Capital advisors into a new unit to serve the middle class market “seems like a smart strategy.”

The combination of Goldman’s deep pockets and institutional brain power means that the investment bank “can do just about whatever they want to” in the RIA space, according to Schweiss.

Indeed, the firm’s far-reaching influence was on display in Washington this week with President Joe Biden’s nomination of former executive Gary Gensler as the next chairman of the Securities and Exchange Commission.

What will Gensler do at the SEC?               
Schweiss said he expected Gensler to bring “more clarity” to the SEC’s controversial Regulation Best Interest Rule, which came into effect last June.

Many RIAs and consumer advocacy groups have criticized “Reg BI” for being ambiguous and too weak to rein in conflicts of interest by brokers.

While the Best Interest Rule is not a fiduciary standard, it “was not intended to be,” Schweiss noted. As a result, “there’s a lot of anxiety about what the rule really means,” Schweiss said.

The SEC’s role in the marketplace is to protect investors, facilitate capital formation and facilitate fair, orderly and efficient financial markets, Schweiss pointed out.

Republicans tend to emphasize the last two roles, he said. Under the guidance of a Democrat, Schweiss said he expects the SEC to “exert a little more weight on the consumer protection side.”

FPA challenges
As for the FPA itself, industry veteran Schweiss, who was also the former managing director of advisor advocacy of TD Ameritrade Institutional, is under no illusions about the challenges the organization faces.

The FPA’s membership has declined by 18 per cent in the last five years, much of it coming in the last year alone. A confluence of trends has led the organization to an “evolutionary” crossroads, according to Schweiss.

The pillars supporting the FPA have traditionally been continuing education, community and policy advocacy. But most newly-minted certified financial planners are coming from large financial services companies like Vanguard and Merrill Lynch. 

Advisors from those kind of companies already have plenty of community-like support from colleagues as well as an abundance of continuing education programs from management, Schweiss said.  And even advisors from smaller firms now have a wide array of continuing education programs to choose from.

In addition, regulatory policies supported by smaller RIAs are not necessarily supported by big wirehouses.

The FPA’s dilemma is analogous to a company with good products that is nonetheless experiencing a decline in customers, according to Schweiss. “We have to reorient the value proposition so more customers are attracted to the offering,” he declared.

That will include reimagining community events to combine in-person meetings when the pandemic ends with more virtual components. For example, the FPA’s national conference is scheduled to take place in Columbus, Ohio from September 22 to 24 but will combine in person and virtual events.

The FPA will also offer members discounts on products and services including health and disability insurance and planning and other software for advisory firms. Recruiting a younger and more diverse workforce will be emphasized and advocating for public policy supported by advisors will also be stepped up, Schweiss said.

CFP Board: Ally or competitor?
The former TD Ameritrade executive “has the industry connections, respect and leadership savvy to make change happen” at the FPA, said industry consultant Tim Welsh, CEO of Nexus Strategy. “If anybody can turn the FPA around, it is Skip.”

But Schweiss will be limited to just one year in office and the volunteer leadership structure “really limits anyone from making a big difference,” according to Welsh.

The FPA’s national organizational structure and relationship with the CFP Board are two other big challenges facing Schweiss, Welsh said.

“The entire leadership efforts at the local level are volunteers that turn over frequently, so any consistency or organized recruiting efforts will be difficult,” Welsh maintained. “That’s particularly true in the pandemic, where the monthly chapter meeting is no longer. True organic growth has to come from the local chapters, so can Skip rally local leaders and put in place growth strategies there?”
 
Meanwhile, the FPA is confronted with a paradoxical dilemma: it supports the CFP designation as a model industry standard, but the growth of the CFP board has undermined the FPA’s viability.

“The number of CFPs are growing consistently, yet the FPA is shrinking,” Welsh noted. “And the CFP Board continues to add more and more member-like services including referrals, networking events, advocacy, next generation and minority outreach. Who needs FPA membership then? The FPA has been forever linked to a competitor of their own creation.”