Cetera: New analytical tools help identify potential conflicts
Catherine Bonneau could be forgiven if she felt that her job exemplifies the adage out of the frying pan and into the fire. Instead, though, she’s charging full-steam ahead.
Indeed, just days after Cetera's parent company emerged from bankruptcy, Bonneau, who helms the firm’s bank channel business, sounded pleased as she outlined its approach to the new challenge ahead: the fiduciary rule. Despite the landscape-changing rhetoric from all corners, Bonneau, for the first time in years, doesn’t have one hand tied behind her back.
Still, it won’t be easy. She acknowledges the DoL rule truly flips the wealth management industry on its head, especially the bank channel. As she likes to describe the history of the bank channel, it was a business built on the idea of generating revenue from transactions and “giving away the advice.” And while there has been much talk across the industry in recent years of moving away from that model, transactions still rule the day in banks. Until now. “The new world is all about getting paid for advice and minimizing the cost of products,” she says.
To help support the bank advisers in the new fiduciary world, Cetera has launched a suite of analytical tools dubbed DoL DynamIQs, designed to help advisers analyze their practice, she said. She expects the results to indicate most of the firm's advisers need a refresher (a “knife sharpening,” as she says). The tools will help identify the specific accounts of an adviser's business that may be affected by the rule. One component of the new tool, called iQuantify, is designed specifically to assess advisers' readiness for the rule and even helps them map out a plan to get compliant, according to the firm.
As the fiduciary rule becomes implemented industrywide, products will change (they are already seeing an uptick in interest in life insurance) and, she believes, the delivery of services will change in a way the suits community-based institutions. Indeed, banks and credit unions are "uniquely positioned" for the change in the industry, she says.
One difference she expects to see in the future is a better use of time for advisers and clients alike. She wants to help foster an environment where clients are better prepared for their first meeting with their advisers because they've already done some of the preliminary work that traditionally would have been done in the initial meetings.
For top-level strategy, she says organic growth is a top priority for her this year: Investing in existing programs, and increasing wallet share. One specific concern is that some advisers have books of business that are too big. "Very large books are ok in transactional world, but not in fiduciary world," she says.
The answer will be in segmenting, she says. This will help meet needs of clients in their lifecycle." One new offering that Cetera is developing is a digital product, she says, although she would not elaborate on details.
Over the long term, she expects to see more consolidation among TPMs. It's a business that rewards scale, she says, and she thinks Cetera will be able compete as the industry matures and winnows out the number of players.
Last month, Cetera's parent company, RCS Capital, emerged from bankruptcy, allowing the broker-dealer to rename itself Aretec – Cetera spelled backward.
The move lifted a cloud that had been looming over Aretec and drew to a close months of questions and worry for many of the 9,000 advisers under the cloud of its tainted parent company.
As part of the prepackaged bankruptcy plan, RCS took receipt of a promised $150 million from its new owners, a group that does not include controversial RCS founder Nicholas Schorsch, according to an article by Financial Planning, a sister brand to Bank Investment Consultant.. Schorsch had gone on an acquisition spree in recent years and snapped up several broker-dealers, including Cetera.
The $150 million infusion will help fund investments in adviser growth, technology and practice management support, according to a release. An accounting scandal in another company run by Schorsch contributed to the collapse and delisting of RCS stock.