Slideshow 10 Smartest Things Heard at BISA Conference

  • March 12 2014, 1:45pm EDT
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10 Smartest Things Heard at BISA Conference

Regulatory, recruiting and retirement issues dominated the agenda at the Bank Insurance and Securities Association 2014 annual conference in Hollywood, Fla., on March 5 – 7. Here are some of the smartest things we heard from economists, executives and other industry leaders during the three-day event that drew a record number of bank and credit union advisors.

<b>Shortage of advisors can turn into a crisis if the problem is left unaddressed.</b>

While participants in a panel discussion differed in their views on the severity of the advisor shortage, all agreed that action was needed to address the issue. Frank Consalo, director of sales at Citi Personal Wealth Management, noted that sales and program managers should continually contend with the challenge of recruiting. “Recruiting isn’t something you do when you have nobody. It’s something you do every single day,” he said.

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<b>Standard recruiting incentives are ineffective in today’s environment.</b>

Trying to recruit advisors by offering them a $40,000 base salary and 40% payout for one year? This standard recruiting incentive, while competitive just a few years ago, is unlikely to lure advisors away from other firms, said Peter Bielan, a principal of Kehrer Saltzman & Associates. “If you’re still offering that, you’re either not getting the candidates that you want or you’re not getting enough of the candidates that you want,” he said.

To attract advisors, financial institutions need to offer more progressive recruiting incentives that ensure that advisors have comparable first-year earnings and upside potential to make the move to a new institution pay off, Bielan said.

<b>Brokers need more bank oversight.</b>

When banks “pretty much give the keys over to the broker” to let them run the program through their organizations, “that’s not what we want to see,” Stephanie Boccio, a national bank examiner and asset management risk specialist at the Office of the Comptroller of the Currency, warned advisors. “We want to see active engagement of the bank having oversight.”

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<b>A manufacturing renaissance will fix the U.S. economy.</b>

The nation’s monopoly on natural gas will drive a “manufacturing renaissance” in the U.S. that will “fix us,” said Burt White, LPL Financial’s chief investment officer. “If you have an energy advantage, you have the advantage,” he said, explaining that energy is the second biggest cost factor in manufacturing.

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<b>Align long-term strategy with secular trends.</b>

“Align yourself with the secular trends. Don’t fight them,” said TD Ameritrade President and CEO Fred Tomczyk. When the firm undertakes its “typical trend analysis,” trends are identified as either cyclical or secular. If the trend is cyclical, the firm tactically adjusts its strategy. If it’s secular, the firm invests for the long-term, he said.

<b>Clients’ families want the advisors to play the bad guy.

When it comes to long-term care, many family members simply cannot bring themselves to broach the subject with their elderly relatives, said author Barbara McVicker, a panelist in one of the sessions. They want the advisor to “be the bad guy” and start those unpleasant conversations, she said.

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<b>Social Security is amazingly generous in some ways that no private company could match.

There are features of Social Security, particularly some spousal and survivor benefits, that would amaze many advisors if they knew the full ins-and-outs, said author Brian Doherty. “Only the government could do this,” he quipped at one point in his presentation. He began by outlining some solutions that would keep Social Security solvent for the next century, which, while not always politically feasible, still offered lessons for advisors.

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<b>Some things you budget for and some things you insure against.

Finance professor Moshe Milevsky said people tend to underestimate the chances of dying from likely causes, like heart failure or cancer, while overestimating the chances of dying from unlikely causes, like murder. But the difference between “likely” and “unlikely” in this scenario is important, because you should budget for the likely events and insure against the unlikely. As an example, you might be involved in a car wreck and get sued for $1 million, but you don’t set aside that much money just in case; rather, you insure against that unlikely event.

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<b>The U.S. economy should grow a little more than 3% in 2014.

Publishing magnate Steve Forbes delivered the keynote speech on the final day, and he compared the U.S. economy to a resurging baseball player after a bad year. Specifically, one “who hit .160 last year and is expected to hit .260 this year…but is capable of hitting over .300.” Another tidbit from Forbes: He expects the U.S. dollar to be pegged to gold again sometime within the next generation.

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<b>We need a new way to look at diversification.

The way we’ve segmented investments for years has been misguided, said Burt White, LPL Financial’s chief investment officer. He showed data that illustrated how the differences between small-cap and large-cap, or between growth and value, have been diminishing over the past 15 years or so. And as those investments become more similar, diversification decreases. Instead, we should be looking for trends and diversify between themes, he says.

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