Like everything else in our world, change is about to happen both more quickly and more frequently in the wealth management world. Those who adapt will survive, perhaps even thrive, under the changes ahead.


Stealing most of the headlines in 2016 was news about the Department of Labor’s fiduciary rule. This ruling is a big deal for the profession. The primary intent of this bill was to have brokers — a.k.a., financial professionals who earn their income via commissions — provide lower-cost products and services for their clients’ retirement accounts. The rule is complex, with an entire set of workarounds for those still living in the commission-based world. The rule, however, impacts investment advisors as well. Even if you are a fee-only practitioner, there are aspects of this bill that will apply to your practice. Issues such as choice of custodian, fees charged by custodians for trading or account servicing, share class in the case of mutual funds, and documenting any such decisions are just a few of the areas to be concerned about.

While there are rumors circulating about what the new administration may do to the rule, do not plan on its complete demise. The principles behind the fiduciary rule are well founded, and someday this rule requiring fiduciary behavior will extend to all of the work performed by an advisor.

The U.S. Department of Labor
The U.S. Department of Labor Bloomberg News

In fact, I believe that the DOL has awakened other branches of regulatory oversight, forcing them to also address the issue. The Securities and Exchange Commission has been somewhat silent, but I believe that the DOL rule has indirectly sent a message to other regulators that better regulation of financial advisors is needed. The crux of the issue is this: Are you my advisor, confidant, fiduciary working on my behalf? Or are you a broker, without the requirement to act in the clients’ best interests? For me, I prefer a clear line between brokers and those qualified and willing to be a true fiduciary advisor to the client. A better fiduciary rule would apply to all of an advisor’s dealings with a client, and not just their retirement holdings.


A close second in the headlines about emerging trends is the emergence of robo advisors. Like it or not, robo advisors are here to stay and I believe that they can help both advisors and our clients. My only problem with the robo advisor is the name. The robo platforms currently available are not advisors, they are investment platforms. A better name would be “robo investors.”

Of course, some robos will incorporate some planning intelligence and other artificial intelligence to assist with planning decisions — but today that is not the case. Today, a robo cannot replace the great work that a wealth manager can do with challenging personal issues. In fact, some robo advisor platforms have already begun the process of humanizing their services. These firms have hired trained financial professionals to offer services beyond asset allocation and asset management. These human beings can prepare a comprehensive financial plan, talk to their clients, and offer advice.

What robo advisors have also done is to allow capitalism to strike with regard to asset management pricing. Fees for asset management are dropping, and unless your performance is off-the-charts amazing, you will lose the price and performance discussion as robos become more ubiquitous. The fees that robo platforms charge for asset management range from about 20 basis points to a high of 50 basis points. What will be required to maintain the premium pricing charged by most wealth management firms is just that — wealth management.


When you think about it, the financial planning profession is not even 50 years old. The evolution of the standard of care owed to clients has grown all the way from consultative sales through proactive and holistic financial management offered on a fiduciary basis.

The term “wealth management” just appeared on the scene about 10 years ago, and it is still not fully understood. In my opinion, there is a great distinction between financial planning and wealth management. Financial planning to me can be delivered like a final exam. The planner must be thorough and complete, but it is an engagement that is frozen in time as soon as it is complete unless the client wishes to continue. Wealth management, on the other hand, is the process of financial planning applied consistently on an ongoing basis throughout the various life cycles and circumstances clients encounter.

The standard of care is now rising to the point where if you are not delivering wealth management that is proactive and holistic across the entire spectrum of financial issues that may impact your client, you will suffer. I am blown away daily when prospective clients come in who are generally satisfied with their wealth manager, but who have so many gaps in their plan. Just a few pointed questions about the visible gaps and the prospective clients look at each other quizzically and ask, “Why didn’t our advisor fix that for us?” I really don’t know why they didn’t mend the gaps or why they call themselves wealth managers.

Most clients need more than your simple retirement analysis or investment risk review; they can get that for free online. What they need and now want is a confidant who understands the family and a professional who can cut through all the jargon and ego of the other advisors to make sure that the client’s financial house is in order.


If you follow what has happened in the U.K., Australia and New Zealand, the raw numbers of people calling themselves a financial advisor or a wealth manager have dropped materially. That is because these countries have done a better job at regulating the advice profession than we’ve done here in the U.S., making it almost impossible for a lip-service advisor to earn a living.

A lip-service advisor is one who talks a great game about financial planning only to sell you what they want to sell you. If your FP practice is more sales than service, consider selling it now or joining a firm that can add materially to the advice you render. Just lingering with no change is going to harm the value of your firm and your ability to sell it upon retiring.

The fiduciary rule is the first shoe to drop with respect to possible regulation of the advice business, and you can expect future and more stringent regulation from sources beyond the DOL. Educated consumers are also helping to rid the world of lip-service advisors. Clients are more sophisticated than they were 20 years ago. If you are charging wealth management rates for a job that can be satisfied by a robo for 25 basis points, the talk of your demise is not premature.


The issue of succession planning is so hot that it is on the hit list for the SEC in this upcoming audit season, alongside your overall business continuity plan protecting your clients from major, unexpected disruptions.

Succession planning isn’t easy. You have to figure out both the financial part and the people part. CPAs have helped with this since the beginning of time for their accounting clients and now need to take their own plan just as seriously.


Just like wealth management itself, the use of technology in professional service firms is evolving fast.

Progressive wealth management firms invest thousands each month for technology. The necessary tools include, but are not limited to: financial planning software, aggregation tools, portfolio management tools, CRM, risk analysis and portfolio analytics tools, communication tools for video conferencing, and Web-related applications.

While some of your older clients may still want paper statements, you better have a more electronic and efficient way of serving and communicating.


Many advisory firms, especially those inside a CPA firm, have an aging client base. This is good for a few reasons. Older clients think about this stuff more than younger ones, they generally have more money, and they become delegators versus do-it-yourselfers as they age. But someday soon, your clients will pass, and you’ll either lose that family relationship and the assets you may oversee or you won’t. Not understanding and serving your clients’ next generation of family is a costly and stupid mistake. The next generation cares deeply about their parents, and genuinely wants to know that their parents are in good shape and that their house is in order. This could start as simply as a family meeting to talk about the children’s roles in the parents’ estate plans or helping your clients’ children with their own financial decisions.

The next generation also applies to your wealth management staff. Employing younger, smart and motivated professionals may not only help with your succession plan, but it sends a signal to your clients that you do care about continuity of service.


The last trend that will continue for the foreseeable future is a trend of consolidation. Smaller RIAs simply can’t keep up with the technology, compliance, subject matter expertise and succession needs of a full-service wealth management firm. As a result, mergers and consolidation of these smaller firms are inevitable. This also ties into the demise of broker-dealers as we know them today. BDs that were once considered the only way to enter the wealth management business are now losing ground to larger RIAs that already work on a fiduciary basis. The only loss for the advisor going RIA-only is the ability to sell products for a commission, which is a blessing in disguise and leading your firm to where the puck is going.

Each of these trends are well on their way to becoming the norm.

John P. Napolitano

John P. Napolitano CFP, CPA, is CEO of U. S. Wealth Management in Braintree, Mass. Reach him at (781) 884-2390.