Professional advisors need to be more protective -- of both their practices and their clients, according to HD Vest president and CEO Roger Ochs. 

In his opening address to the company’s Connect 2015 advisor conference, held here this week, Ochs warned attendees that they need to, “Keep the bad guys out. It’s around cyber-security. We’ve made millions of dollars in investments in strengthening our perimeter. I use the analogy of the house that’s not locked, and all the burglars are checking the front door, and then the side door, and then the window, and that happens repeatedly. So we’ve locked our systems down and we feel really good about that, but a bad guy will go to the weakest link. You only need one window open, so we need to make sure that advisors are protecting their client data and making sure their servers are locked down, their desktops are locked down. There’s some fundamental things -- having anti-virus protection updated, or having the latest update to their operating system. There are a lot of bugs that are eliminated just by keeping up with the technology.”

“We’ll be much more proscriptive in terms of our expectations and best practices are for our advisors in the field,” Ochs said in an interview later with Accounting Today. “They get it -- we didn’t use to have cyber-security sessions at this conference, but that room will be packed, because advisors are really interested in learning how to protect their client data. It’s a risk that we as leaders have to plan for.” 

Advisors need to protect their practices in other ways, as well. “We need to make sure that advisors have their business protected through disaster recovery plans,” Ochs said. “There could be another Katrina or Sandy or power outage Tropical Storm Bill. Or the power could go out for a couple of days, or a pipe leaks -- it can be something as basic as that, but if it puts you out of business, you have to have a plan in place. What’s your backup plan? What’s your Plan B? We need to make sure advisors have that, and in fact many of the state security commissioners are requiring that.”

The second component of protecting their firms is succession planning. “How are you going to protect your business for the next generation? We have dedicated resources internally to help advisors develop and execute on those plans.” Far too often, Ochs, explained, the company gets a call from a surviving spouse asking about protecting the practice and the clients. “At that point, it’s a bit of a melting ice cube. It’s much better if there’s a plan in place. Since we started our plan three years ago, we converted over $2 billion in assets from one advisor to a successor advisor.”

“[Succession planning] can be a simple as bringing someone into your business and training them, or going through a formal sale process to find someone to take over your practice,” Ochs explained, “but at the end of the day it’s about protecting the clients and putting them first. With our guys, that’s what resonates with them. They want to do the right thing for their clients.” 

Vest is well suited to helping advisors in this area, Ochs maintained, as they’ve got more advisors in any given area: The company will bring on 620 new advisors this year (against 455 last year), bringing its total to 4,500. “There’s a very small list of firms that are bringing new financial advisors into the industry,” he said. “Most other firms out their are in net redemptions, as people retire, but our business model continues to bring in net new advisors.”

Finally, Ochs addressed some major regulatory issues. “We have to make sure we’re helping the good guys in terms of regulations and protecting clients,” he continued, referring in particular to the Department of Labor’s proposed revisions to the fiduciary standard for IRA advisors. “We’re in favor of the fiduciary standard, but with the way they’ve built in a lot of their disclosures and what you’ll have to do to comply with that rule and be compensated for it, we think that small investors will be left out in the cold. There’s so much red tap associated with trying to comply with the rule that a smaller investor just won’t get the kind of advice that they get today. A lot of advisors just won’t be able to serve those clients, which is really unfortunate.”

Vest is working with Congress, the White House, the DoL and others to reshape the standard, and also to apply it elsewhere. “Why would you have fiduciary standard for IRAs and not have a fiduciary standard for everything else? It just doesn’t make sense.”

 

Year over year

Ochs also highlighted some of Vest’s growth over the past year, including the much-higher-than-expected uptake on some of the tools it started rolling out at the firm’s Connect 2014 conference.

“We launched our ‘Reinvent Growth’ strategy in 2014, in which the vision was to help our advisors, who are mostly tax professionals, do a better job of delivering financial advice to clients,” Ochs explained in the interview.

As part of that strategy, the firm released its 1040 Analyst tool, which lets advisors comb through clients’ tax returns to identify financial planning opportunities. Since its launch last June, over 150,000 tax returns have been uploaded to the tool, with Vest gathering in some $250 million in incremental assets that were identified through the process -- and approximately 80 percent of those returns were from prospects, not current clients. “We’ve been very happy with the results so far,” Ochs told Accounting Today. “But we think there’s tremendous upside, because we only have 150,000 tax returns out of the millions that could possibly be uploaded.”

The company also released Vest Vision, a tool for establishing a client’s financial priorities and then tracking progress toward those goals. Since it was launched last fall, 6,000 plans have been created and delivered to clients through that tool. Those plans represent about $2.7 billion in assets tied to the plan, with another $2.1 billion not in the plan and not managed by HD Vest. That money, which might be with another firm or in a 401(k) or a CD at a bank, is visible to the advisor, which allows them to create more robust plans.

Also part of last year’s rollout was the Vest Advisor Select program, which lets advisors delegate money management to Vest, while still retaining control. “The advisor can make changes to the portfolio, they can rebalance, they can swap funds if they want to,” Ochs explained, though most advisors and clients leave the asset management to Vest. The program is Vest’s fastest growing money management platform “by far,” he said, with $1.55 billion in assets under management flowing in so far.

Vest also launched new account-opening wizards to make the onboarding process easier for advisors, as well as social media campaigns and Web site tools, which over 600 advisors have adopted.

“We’re not changing our strategy,” Ochs said. “This is the right strategy. It’s now all about execution and adoption, tweaking what we’re doing, but more important driving adoption of the tools that are there.”

 

 

 

 

 

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