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IBDs Change Tune on Digital Advice Ahead of Fiduciary Rule

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Independent broker-dealer advisors think they may have a problem with the Department of Labor's pending fiduciary rule, namely servicing smaller clients and staying ahead of investor trends and regulation.

Ladenburg Thalmann believes it has a solution: $ymbil, its new digital advice platform. The self-service portfolio account will be made available to its advisor network and will require a minimum $500 investment to open. 

Adam Malamed, chief operating officer at Ladenburg Thalmann, one of the country's biggest independent broker dealers, says digital advice tools are essential for modern wealth management.

"Having good technological solutions intact can help advisors and clients deal with the upcoming regulation," Malamed says. "We don’t know exactly what the rule will look like. But we do know it's coming."

The launch comes amidst industry expectations that smaller accounts collectively worth billions will be dropped by firms unwilling to service them due to cost or liabilities, straight into the arms of independent robo platforms.

"If the mindset out there is that there's going to be smaller accounts that are going to need advice, and there's going to be less appetite among financial advisors to service those customers, then where else are those customers going to turn?" Malamed asks. 


He stresses that the robo platform, which was developed on software provided by New York-based Invessence, was not built as a response to the pending rule, but partly as an acknowledgement of a coming shift in investors.

"We are constantly challenging ourselves, what will the future be when we sit down and talk about the industry," he says. "In the long term, digital advice will be here to stay. We want to be on the cutting edge of it."

Only a year ago, most major IBDs could be critiqued for being slow to develop a digital advice platform. The exception was Northwestern Mutual which had inked a deal to acquire LearnVest, citing the startup's "breakthrough technology" as a top reason for the deal.

Read more: Independent B-Ds Faulted in Robo Race

Since the LearnVest deal last March, LPL and Commonwealth have announced planned robo rollouts. Getting Ladenburg's platform online before the competition's wasn't the priority, Malamed says, cautioning that the firm views the platform as one that will develop over time.

More important, notes Philip Blancato, CEO of Ladenburg Thalmann Asset Management, is that it finds acceptance among advisors in its network, as there is still a sense of trepidation about adopting digital advice tools.

"Can we get advisors to realize a wave of technology is coming that will make them better financial advisors?" Blancato says.


Blancato acknowledges that some advisors were "not pounding the table," for the digital solution. "It's like how you walk past a Ferrari and say it's a beautiful car but you're afraid to get in," he says. "There's a sense of, 'Do I need this, is it relevant to my future, are my clients asking for it right now, it is really right for me?'"

Engaging in that dialogue with commission-based advisors and developing these tech tools are part of the hard process IBDs and other wealth management firms will need to prepare for a post-fiduciary rule environment, says Jefferson National CEO Mitch Caplan.

"Unless these incumbent firms change the way they do business, these smaller accounts will end up going to fee-based advisors and fee-only RIAs — many of whom are using digital advice — and many of these smaller accounts could end up going directly to robos," Caplan says.

Caplan's firm conducted a recent study on advisors. "We found that the most successful advisors — those who earn more and manage more AUM — are twice as likely to adopt technology and be early adopters of robo solutions.

"Over time, more firms and more advisors at all levels will join the ranks of these early adopters and will incorporate robo solutions as a part of their practice," he continues. "The ones who do so understand that digital advice is not the competition — it’s an ally and a partner to help you build a more successful practice. The ones who don’t won’t be in business in five years."


Morningstar equity analyst Michael Wong says there should be a concern among the smaller broker-dealers and advisory firms that don't have a technology solution in place yet either because of lack of resources or a lack of action.

"Some of the smaller financial players may have been doubtful a rule would even pass," Wong says. "For those players, having some type of fiduciary-compliant platform that can help with those low balance accounts will help them quite a bit, especially if they've been behind the ball for the past year."

The platform is just one element of Ladenburg's overall strategy to innovate and remain competitive in a changing wealth management industry, Malamed says.

"We have an enterprise of 4,000 financial advisor partners, and there are a series of initiatives internally on how we’re going to deal with the landscape of the financial services industry going forward," Malamed says.

"Nobody knows what's going to happen to these smaller accounts," he adds. "The financial industry has adapted throughout history and innovated throughout history. There will be some challenging times in the years ahead, but as we leverage intellectual capital and leverage thought leaders throughout the industry, there will be a way for everyone who wants financial advice to access it."

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