Ep09 - Rethink: Advisor, Adviser or Advicer? – Featuring Michael Kitces

Adam and Derek welcome industry thought leader Michael Kitces to dig into what it actually means to be a 'financial advisor' today, arguing the terms advisor, adviser, and advicer reflect real differences in whether a professional is compensated for products or for advice itself. Kitces traces the erosion of the advisor's traditional gatekeeping role as information has become freely available, and discusses fee compression pushing the industry from asset-based fees toward recurring advice fees. The conversation also touches on the growth of the CFP credential as a market differentiator and closes with a listener question about why advisors go independent. It's a wide-ranging, expert-driven episode that grounds the show's usual debates in Kitces's research and long view of the profession.

• Advisor vs. adviser vs. 'advicer' — what the terminology really signals
• The erosion of the advisor's traditional gatekeeping role
• Fee compression and the shift from asset-based to advice-based fees
• Growth of the CFP credential as a market differentiator
• Regulatory evolution and the industry's advice standard
• Why advisors choose to go independent (listener Q&A)

Full timestamped transcript.

[00:00:00] H. Adam Holt: Welcome to Rethink the Financial Advisor podcast. My name is Adam Holt.

[00:00:06] Derek Notman: And this is Derek Notman. We are your hosts, both veteran advisors and fintech CEOs who challenge the status quo, question everything, and have fun doing it. Hear honest commentary on the challenges facing advisors today. And be part of a community where we can all rethink the profession.

Now on to our episode.

[00:00:28] H. Adam Holt: Derek, what does it mean to be a financial advisor today?

[00:00:32] Derek Notman: Hey, Adam. Yeah, that's a really interesting question 'cause I, I... The, the term financial advisor, I think if you ask 100 financial advisors what it means, it's gonna be, have 100 different answers or definitions. I would say in general, very general terms, it's somebody that helps somebody else with their money.

But I, I think that we really... Well, we've got a special guest today, and we're gonna get into this, but we've got someone that can give us, I think, some really great expert advice and insight on what this term is and how to think about it.

[00:01:04] H. Adam Holt: Yeah, I'm, I'm excited about this because this, this Rethink the Financial Advisor as part of our podcast, we're, we're getting so much inbound interest, and say, "Well, what's a financial advisor?

Am I, am I an advisor?" So tell us about Michael Kitces if, for those of you that don't know.

[00:01:18] Derek Notman: I sure hope that everyone does, but if you don't, Michael has, he is best well-known, if not the most well-known thought leader in the financial wealth space, uh, when he's, you know, supporting other financial advisors.

He's been around a long time. Uh, I'm not dating you, Michael. Uh, I know you're still a young guy. But, uh, yeah, he's the founder of Nerd's Eye View. He's extremely successful podcaster, blogger. He speaks at industry conferences all over the place. He's still an active advisor, which is awesome, right? I mean, that's part of how we love him.

I mean, he, that resonates with us, Adam, right? Of course.

[00:01:54] H. Adam Holt: That's true. That's true.

[00:01:55] Derek Notman: Um, and just, just super highly regarded, but also I have found him to be very, um... He's a good person who wants to help other advisors, and he's very approachable. I'm not saying everyone should go send him an email right now, but

[00:02:12] H. Adam Holt: He has a blog for that.

Yeah.

[00:02:13] Derek Notman: Right. Um-

[00:02:14] H. Adam Holt: That's good ...

[00:02:15] Derek Notman: but anyways, yeah, I think we're gonna get a ton of value and insight from what he has to say. We had a really fun chat with him.

[00:02:20] H. Adam Holt: It's true. We, we invited Michael to be part of our rethink tank. Uh, as you probably know, we're, we're actually interviewing individuals in special areas.

We wanna get their perspective on what's happening, so this is exciting. So we're gonna share part of our interview and then we're gonna debate it, so there's actually three sections here, so stay tuned to the entire, uh, program. I think you'll get a lot out of this, and then we'll close with our to-dos and takeaways, and, uh, awesome.

So let's jump right into it. Thank you, Michael, for being here. It's really exciting to spend some time with you. So Michael, one of the things that Derek and I have been really interested in is really understanding what's your perspective on how the financial advisor community is changing. What do we need to know?

[00:02:54] Michael Kitces: So to me, the, the, the biggest shift that's underway is, uh, that I, I don't think the whole industry collectively appreciates is how much we really are in this transition from our roots of selling products and gathering assets into, like, actually getting paid for the advice. So like, getting paid for advice for the, for the sake of the advice itself.

You know, whether that's robo-advisors, to me, just more generally, like, tech making it easier and easier for consumers to get whatever product they need by just buying it online. They don't necessarily need us to get the thing. Uh, they need us to give the advice beyond the thing. So we're moving more into comprehensive planning, CFP marks are on the rise, like almost every financial planning software company has been bought in the past five years.

Like, planning advice is in full growth mode. But to me, there, there's still a catch-up for the rest of the ecosystem that's still, like, judges advisory firms by AUM, judges by, uh, uh GDC and production. And, and even just, like, the nature that, of how we spend on technology. If I look at an established advisory firm running some of the popular portfolio management performance reporting tools today, where you're paying, like, 35 to $45 an account- If I take an advisor with 100 clients that's got two or three accounts per client, so I'm at something like 250 accounts at $40 an account, it's not uncommon to see on a P&L like $10,000 per advisor for that portfolio management performance reporting software.

Then I look over at the planning software side and I'll see 1,000, 2,000, maybe $3,000 a year. And so just that dynamic, like I understand why we spend 10 grand on, on, uh, portfolio management tools and two grand on planning software because a lot of our models at the end of the day are fairly attached to the asset management side, so you, you naturally reinvest where your revenue is.

But if you're envisioning a future where we actually really get paid more for advice fees and really say like the, the center of our businesses are focused around advice, and maybe we help implement products and portfolios 'cause clients have money, it needs to land somewhere, but it's not the center of the value proposition.

You say, what does it look like in a future where we only pay two grand for portfolio management software, but we'll pay 10 grand for planning software because that's what's driving hundreds of thousands of dollars of revenue for us? The whole ecosystem we currently use today is gonna go a little upside down in a world where we're paying $10,000 for planning software that probably doesn't even exist yet at that level, and we're paying $2,000 for portfolio management tools, which would really rock a lot of today's tools and platforms.

[00:05:28] H. Adam Holt: So that's really interesting that he brought that up, right? I mean, there's a couple things that I heard there, Derek, right? It's fascinating. Now obv- obviously, you know, the, the disconnect between all of us saying that we lead with advice, and yet all of our, all of our spend goes into executing. And I think that there's a great quote that's out there that says, "Don't, don't tell me what you care about, show me your budget, and I'll tell you what you care about."

Right? The, the, the the same thing holds true with our practices, right? We have, we have individuals that are investing in their practice and tools, or they're allowing their broker dealer or their outfit around them to supply them with the tools. They're spending a significant amount of money on the execution of the money management or the insurance placement, right?

We don't always see that transparently, but that's because that's the revenue generation machine. It's validating the fact that advice is such a small portion of what customers are paying for, therefore it doesn't validate paying a significant amount on the investment side. I thought that was really interesting.

[00:06:24] Derek Notman: It's really interesting, but he also points out that there's this shift happening- Hmm ... uh, where we are... And, and I guess part of this is, like, do you actually envision a future where advice is what was actually more profitable at a business owner level, you know, an advisor level, but also, um, that's what consumers want?

I do envision that future. I think that's where we are headed, and I think there will this, be this kind of flip-flopping of where this revenue is generated. And even talking to younger advisors today, more and more of them are building, even on the independent side, they're building these subscription-based models for planning.

Hmm. And then like, "Hey, we'll just do the advice, you know, or the, uh, the investments or insurance as, you know, as a kind of you want fries with that almost type of thing." And we talked about this before about how there almost might be this marketplace where we just go buy the product. As, as Michael said, like the money's gotta land somewhere, but what we're really paying for is advice.

[00:07:21] H. Adam Holt: Yeah. That's really interesting. It's right. It's almost like you've got these accessories. Okay, so maybe I'll help you get the annuity and the insurance and the mutual fund and the, the TAMP and all these different managers. Those are the accessories, but the advice is really the whole, the whole outfit, the clothing or, or...

I, I'm not exactly sure. I'm making this up as I go along. But, but I think that's really interesting to think that, that it is There are a lot of people that have talked about whether advice really can be a professional service like, uh, like let's say the legal profession, where somebody's gonna still earn the kind of compensation that financial advisors have been used to making, right?

Yeah, yeah. 'Cause the, the real, I think the question I think we need to address is does the business have as much, we'll call it margin capacity, as it has had for years because it was difficult to get stuff? You had to go through an advisor to get it. Yes. Yep. So we had the ability to create, we'll call it from the business end, a significant amount of inefficiency, therefore, you know, you control the money, you're gonna control the compensation as well.

As that becomes more transparent, this crunch is gonna affect advisors at their real wallet. Um, and of course, we're gonna have to figure out a way to monetize if you wanna keep, keep, you know, pace with your prior growth, unless you just can scale. That's, I think this is a big challenge and opportunity in the same, in the same work.

[00:08:37] Derek Notman: A huge opportunity. I, I think- I think that most clients will still want an advisor to implement the investments and insurance- Mm-hmm ... but they're gonna expect you do it at a much lower price point. So maybe your max, uh, AUM management fee is 50 basis points instead of 100, right? Hmm. So you've just lost a whole bunch of revenue there, but you're making up for it now by charging for awesome advice- Yeah

even on a recurring revenue. So, so maybe, like, maybe, like, we net out at the same type of revenue and growth, but it's coming from different places, and that's what Michael was telling us here.

[00:09:13] H. Adam Holt: Yeah. And this is actually a great lead-in to the next section that Michael talked about. We, we fast-forwarded a bit.

Um, he had... He brought up this, this conversation, which we're gonna share with you, about what role you're playing, right, and the product placement, where's your compensation? So let's, let's listen back to Michael again. Wow, that's interesting. I mean, we- Derek and I have talked about this several times, about this kind of commoditization of the investment management and the move towards, uh, advisors.

Now, you have an interesting term that you've used in the past. Why don't you explain that to us, right? I think that's starting to catch hold. You might have actually come on with a, a great, uh, tag, a new, a new hashtag.

[00:09:44] Michael Kitces: Yeah. Yeah, I... Like, we've used this label financial advisors, uh, for what, 20 or 30 years since we all took stockbroker and insurance agent off our business card.

I, I started my career about 21 years ago now. It said financial advisor on my business card. I was insurance agents. Like, no if,s, ands, or buts- ... I was, I was an insurance agent. But, like, that's not what it said. We called ourselves advisors even though we were real- really so primarily in kind of either product distribution or asset gathering business.

Like, again, that's fine. Consumers need this, need this stuff. Money's gotta land somewhere. Like, I'm not trying to be negative about those. But when we shift into the actual business of advice, it's a different value proposition, it's a different path to success, it's different growth. You differentiate differently.

You scale it differently. There's a lot of stuff that's really different. And so I've started calling this group of advisors advicers, like, people who are literally in the advice business, advicers. And I'd like just trying to recognize there is a distinction between this broad group, say, that we call advisors, and the way advicers, people actually in the advice business, behave, right?

Everything from how much do you want to spend on planning software, how much they're not gonna spend on portfolio management software, uh, as well as a lot else about what they need to build their businesses, scale their businesses, differentiate, grow. Just the whole thing looks different when your value proposition is not, you know, your, your company's investment team or your company's slate of products.

It's, like, literally the knowledge between your two ears- That you're like laying on someone to try to demonstrate expertise and get paid for that. So I, I'm, I'm using the label advisors now to make the distinction of just the people who are really in the advice business and trying to build a business around advice.

[00:11:26] H. Adam Holt: So here we go again. This is kind of, this is interesting, right, Derek? I mean, you have this idea that maybe even identity, how you explain yourself to a customer, which we've talked about many times on this podcast-

[00:11:37] Derek Notman: Yep ...

[00:11:37] H. Adam Holt: is really critical. You know, I think we need to break it down, but I, I'd be curious, what were your initial gut reactions to hearing that?

[00:11:44] Derek Notman: Well, it's... I, I love how he has defined it. He's, he's coined a new term. It's pretty interesting. I don't know if I would ever go to a client and say, "Hi, I'm a financial advisor." Uh, that might sound a little weird, but- ... but the, the thought behind it makes sense. What's interesting though is that in all three of these terms, advisor with an O, advisor with an E, and then advisor, they're still sales, uh, driven, right?

Like, it's compensation driven. Um, now advisor- Hmm ... means you're getting comped for giving advice for expertise, not products. Maybe, may- or maybe a blended too, I don't know. Um, but it is, it's an identity thing for sure. I... And I suspect that it's gonna be shifting more and more to the advisor side of things, uh, just because that's what the consumer's asking us for.

[00:12:34] H. Adam Holt: There's a, there's an interesting, uh, concept around identity, and it really goes to... I, I heard this once. They said, uh, they said, "Adam, are you an American Jew or are you a Jewish American?" And I'm like, "Well, I don't know. What's the difference?" Oh. "What does that mean?" And it turns out, if you break apart the English components of it, it's, it's what is the, the, the description of myself, of who I am, is I'm an American.

What kind of American are you? I'm a Jewish American. And I think the same thing is when you think about financial advisor, it really makes a big difference where your true identity lies, where you align. Now, what Derek said is really interesting because financial advisor with an O is what we typically term, term the professional use of I'm a financial advisor.

In fact, many of the firms that had reps, insurance agents, um, financial advisors in a bank, they just adopted this term. Financial advisor has no legal connotation-

[00:13:27] Derek Notman: None ...

[00:13:27] H. Adam Holt: uh, associated with the regulatory, yet advisor with an E-R does. In fact, the registered investment advisor, uh, does con- connotate this idea that you're providing investment advice.

So the RAA or the IAR designations, if you read into this, um, advisor, we're tending to send see actually regulatory awareness around this term of advisor with an E-R. But the advisor, C-E-R, um, really kind of begs the question, could you use this in a way to talk to your clients about how you do get compensated?

I get compensated by advice, and maybe the products are ancillary. Or there's other, some other form of let's go remuneration as a result of ad paid. If I get paid by the product placement, I'll reduce the feed. Can you have that c- can we finally able to do this? That just makes sense.

[00:14:16] Derek Notman: Yeah.

[00:14:17] H. Adam Holt: Um, and I think it's important for every one of us to just decide, you know, kind of where we stand on this one

[00:14:23] Derek Notman: I think so.

It's gonna be a bit of a shift here. But I, I think it needs- what I like is that it's forcing some clarity around it because in all the other industries out there, financial or not, the, the title of what you do is very specific, right? It's, it, and it means something. Where advisor is, is just kinda this generalized term, which I think causes a lot of confusion.

[00:14:43] H. Adam Holt: Mm.

[00:14:44] Derek Notman: Um-

[00:14:45] H. Adam Holt: Very true.

[00:14:45] Derek Notman: Very true. Yeah. Anyways.

[00:14:47] H. Adam Holt: Well, no, true. And, and we asked Michael, we said, "Well, what, what does this, what does this have in terms of the aspect of regulation?" Because this is a, this is an important aspect for us, uh, to understand. There's a couple things that, uh, just jumped out to me, and, and I guess the question I'd have for you, i- if in fact your prior comment on we are leading towards a, a world of advice, w- Derek and I talked about this, we call this it's either advisors that sell or salespeople that advise.

Some- something how this kinda combination of- Mm-hmm ... what came first, the chicken or the egg.

[00:15:15] Announcer: Yep.

[00:15:15] H. Adam Holt: Uh, and it's not, it's really unclear today. A lot of individuals, like you said, uh, both of us actually started in the, uh, sales side and moved towards advice. Yep. I'd be really curious, what do you think is gon- gonna happen to the marketplace of advisors and advisors?

Are we seeing, you expect a consolidation or a, a marginalization of the advisor in general, and they have to increase their skills?

[00:15:35] Michael Kitces: I, I do think there's a, a, a slow and steady marginalization of the, the advisor in that realm, just, just recognizing, like, look, if you go back 25 or 30 years, you literally couldn't get a mutual fund if you didn't go through an advisor.

There was almost no direct to consumer business. Like, T. Rowe Price had this little edge thing. Vanguard was minuscule then. Uh, there were no online, uh, brokerage platforms where you could, you buy a mutual fund in a, in a, in an online account. Like, you had to go to an advisor to get a mutual fund. If you go 20 years before that, that, you had to go to a broker to get a stock.

Like, you literally couldn't buy a stock if you- Right ... didn't go through a broker and, and have them sell it to you. So we, we really were, like, literally, legally, mechanistically in the regulatory environment intermediaries and gatekeepers for products. You had to go through us. And, and that's just not true anymore, right?

When you can get the stuff yourself. Now, still many reasons why advisors recommend products, help clients implement products. Not everybody does it themselves. Again, I'm not negative on what we do to help clients implement, but we kinda had this regulatory sanction gatekeeper effect that forced everyone to go through us, and that's not true anymore.

And I think that's much of what drives this phenomenon that, yeah, you can get the product through me, but you can also get the product online, which is why I give you customized, individualized personal financial planning advice based on your needs and circumstances and our years of experience, right?

We've, we've amped up the value proposition 'cause I think we're all inherently recognizing, oh, I guess I probably gotta bring something to the table beyond just literally the product you can probably buy through some kind of website. And, and so the, the pressure is on absolutely I think for that, that lifting of the value proposition.

I mean, just when you look at it at a most basic level, uh, you know, the licenses we need to be advisors, "advisors," uh, like they're sales licenses. I mean, it's literally what they... Like they're sales licenses. Oh. Here's the rules that will apply to you. Like, I, I mean, if you just think about that, there's, there's no actual test for whether you understand anything about finances or advice in the licenses to be a, to be a financial advisor.

Right. It's like, do you understand how FINRA works and how the SEC works and the, and the laws that will apply to you? 'Cause that's what you do in a, in a sales environment. And so I, I think even the regulation is probably a little behind on that will come up over time. But when you look at the fact that the number of CFP certificants has more than doubled over the past 20 years- Mm

to me you can see collectively, like the regulators may not be lifting the bar on what it takes to be an advisor, but the total head count of advisors is declining, has been for 20 years. The total number of CFP certificants has more than doubled. The percentage of advisors who are CFP certificants is skyrocketing from less than 10% to more than a third- Mm-hmm

almost a third. Uh, and so th- th- that shift is already on. We're starting by getting there voluntarily 'cause it's just how we differentiate from all the other advisors who don't have as much expertise and education yet and are, are still in that reinvestment process. But- Yeah ... the, the game is already on.

I mean, it's, it's happening live in real time, uh, a- as we all try to figure out how do we differentiate in a world where we're like, "Oh, yeah, I guess you really could get that product from anyone," where that you couldn't 20 or 30 years ago. But now you, you really pretty much can 'cause almost everyone's got some fairly open architecture system where I can get you pretty much anything that you could probably also just get off the internet if you really were just trying to buy that.

[00:19:07] H. Adam Holt: Now, we talked about that several times, Derek. I mean, the fact that the marketplace will ultimately answer the question of can I get the products I need when I want them, at the price I want them competitively and so forth, without a human, we'll call it facilitator, AKA financial advisor, right? What do you think?

[00:19:27] Derek Notman: Yeah, yeah. I, I love this, and he sums it up well. I, I, I've got an actual interesting example. This just happened yesterday. Um, for the advisors I serve, uh, through Connector, you know, I, I have access to different tech that I get to preview, and sometimes I even recommend it to these advisors. And a tech company contacted me saying, "Hey, we've got this thing now where advisor's clients can buy life insurance fully underwritten in five minutes."

That's the marketplace, right? So why isn't it... So if, if I'm not getting comped to sell that life insurance policy anymore, why... I still, you know, the client may say, "Okay, I'm gonna go get go there and buy it," but what type of insurance should I buy? You know, how does it fit into everything? How much? Blah, blah, blah, blah, blah.

And that's where the advice comes into play, and it's clear. He said, like, s- CFPs have more than doubled. Other types of advisors are declining drastically, right? So the writing's on the wall, and it's kind of interesting how the, the boots on the ground is driving the change, and the regulatory body's saying, "Hey, yeah, you know what?

These guys are onto something. We're gonna start backing it up with actual regulation now."

[00:20:38] H. Adam Holt: You know, it's funny to me because, you know, we tend to stay in our lane so much, right? When you- when you're delivering financial advice, you're talking to people who want advice, which tend to have... You know, there's some complexity there.

There's some assets. There's some needs for insurances, right? So there's a role for us. They're self-selecting into wa- talking to an advisor. But there's an extraordinary number of people out there that are not even banked, right? That don't, that don't have, or are starting to, starting to create something, and they don't even know where to go.

Um, and they're just under the radar for most advisors. And I think that marketplace, of course, is going to inherit the next generation's money, and it's important for us, I believe, to position... That sometimes we need to just help people buy, right? Because they just don't even have any education around this.

Um, and, and it kinda leads me into another conversation that came up on a- another panel we were on recently. The number of financial advisors, CFP certificants, that don't know how to actually help somebody learn about budgeting is, is amazing. And it promotes the fact that I think most of the CFPs out there, sometimes myself included, are so used to dealing with the high-end problems, we don't know how to deal with the basic ones as well.

Like, we've forgotten the pushups. And I still think that there's going to be a need for speed planning and, you know, quick engagement triage, you know, aspirin, if you will, uh, on the planning side. But it's, it's gonna be b- people are gonna come to us because we can help them solve their problems, right?

[00:22:03] Derek Notman: Yeah,

[00:22:04] H. Adam Holt: for

[00:22:04] Derek Notman: sure. And it's gonna be lots of them. Well, you almost, you almost call it, what is it called? Like, planning light, right? There's gonna be a huge need for that, and software that can actually help facilitate it, of course. Um-

[00:22:15] H. Adam Holt: What do you think about the regulation, though? Do you think that the, do you think that the CFP could become a regulatory, or more than it already is?

'Cause it does have an ethics board and has components there. Do you think that that could create an advice standard?

[00:22:29] Derek Notman: I think it could. I think if the, uh, if the SEC or any federal body is looking for guidance or a model that they can base regulation off of, I think the CFP's a pretty darn good one. Um, you

[00:22:40] H. Adam Holt: know- I know that customers right now can submit complaints to the CFP board too against CFP certificants- Exactly

if they feel like they, they've been, you know, taken advantage of relative to advice.

[00:22:50] Derek Notman: They certainly can. So I, I think that that could possibly happen, and I'll tell you, if you're an advisor who's not considering getting a CFP, like, this is on the horizon. I would pay attention to it. Yeah, it's a lot of work, but, uh, again, you know...

Well, we're gonna get to my point on this here in a second, actually, so I'll, I'll withhold comment for a little longer.

[00:23:09] H. Adam Holt: No, tell us. Tell us. I mean, what are, what are the takeaways? So what are adv- what can advisors be doing right now to, to take some of the information we learned from Michael today, put it into their practice?

[00:23:18] Derek Notman: Yeah, I mean, de- define what type of an advisor, adviser, you know, how you spelling the word, right? Like, what are you? And, and, and own it. Own it what you are 'cause, you know, you're not gonna change overnight. If you're just the insurance, um, producer who's under the guise of financial advisor term, like, okay, own that, um, but be aware of where things are headed.

You know, I, I would also, like, say, like, don't feel like you have to be shamed by others that, that have a different feeling about this, and this is actually gonna lead into a bigger topic later. But anyways, know who you are. Um, understand the industry is, is changing, and it's happening by, because of your peers first actually, and then the, I think the, the regulatory bodies are, are catching on pretty quickly.

And, and I think it's gonna be important that whatever type of advisor you are, I think you're gonna have to consider advice as part of your practice moving forward, and to really skate where the puck is headed- Mm ... not to where it's been. So think about that and how you can maybe add that to your, to your, uh, you know, what you're doing, to your credentials.

Um, and then just align with people and companies that are empowering you to do these types of things, who are open to change, who are forward-thinking. Mm. And, you know, as always, stay away from the negativity. There tends to be a lot of negativity in this space, uh, which we're gonna unpack here a little bit in another episode.

But that's, those are my takeaways. That, that's why I think advisors could walk away from here and do pretty quickly, actually.

[00:24:43] H. Adam Holt: Great. And, and I think the things for me is, you know, when I listen to Michael speak, and I, I think he does a great job, and I have to thank him again because, you know, he's so approachable, he's so willing, and, and thank you.

And if you haven't had a chance to check out his blog, please go check it out, Nerd's Eye View. Um, and you can... That's easy enough to Google, uh, Michael, and see what he's talking about 'cause always- It's his

[00:25:00] Derek Notman: dot-com

[00:25:01] H. Adam Holt: Yeah. He's giving more information than, than he ever asks for in return, so that's- Oh, yeah

really, really great. Thanks for what you do, Michael. Um, I, I think the first thing y- for every advisor is you gotta decide if this even matters to you, right? Like, does it matter if you're an advisor, adviseor, advisor? Maybe it doesn't. Um, but if it does, then decide which one, as Derek said, and own it, and also maybe perpetuate, maybe tell people.

Uh, if you're gonna be an adviseor, or you're moving towards this kind of idea, maybe it's a market differentiation, uh, attitude, where you could say, "Listen, I'm an adviseor. Here, let me explain to you why I'm different," and promote that and market it like we've talked about in prior episodes. Um, I think the other thing is, here to take away, everybody, every client at some level is going to expect that whatever you promote in the solution side is coming from a needs analysis.

Yes. So that means that despite the fact that we wanna do financial planning for everybody, maybe we believe CFP is the future or some kind of version of regulatory, everybody needs some level advice. And more importantly than, than getting that advice, whether they need an aspirin, triage, or surgery, right?

The full deep analysis or they just need, you need a solution. You need to be able to back this up with evidence that you provided guidance based upon a process, and here's the reason why. If we do move towards a regulatory environment, best interest, DOL, whatever the next- Yeah ... version's gonna be, the historical aspect of what you've done for people that you've been collecting compensation on for years is gonna be important, and you need to make sure that you have a way to document your fact-finding, document your, uh, your milestones that you've hit for them and the advice that you've given them.

Uh, and if you need to back up your truck, you can do that as well- ... during my podcast. Um- Well, I thought

[00:26:38] Derek Notman: you were pushing a button there. I thought you

[00:26:39] H. Adam Holt: had one of those fun buttons. It... I wish I had, like, the mad money. I would, you know- Yeah, right ... like Cramer, all of a sudden. Play the backing up of the truck.

Let's jump to our community question, Derek, uh, because we got this. Would you, uh, mind sharing what Rebecca from New York shared?

[00:26:52] Derek Notman: Yeah, this one is, has been something I think there's been a really strong undercurrent here, so I'll jump into the question, um, and then we can, well, we'll talk about what we're gonna do here.

But Derek and Adam, and this comes, uh, from Rebecca in New York City, by the way. Uh, thank you, Rebecca, we appreciate it. Uh, Derek and Adam, I'm always getting different, uh, arguments about the differences between an RIA and captives and insurance broker dealers, and why any one of these is better for me than another.

I hear from my newly minted RIA friends that I have to come over from the dark side, but I'm not sure that there are any less real problems since we're all just running businesses to serve our clients. Can you guys do an episode on this topic? Thanks, and keep up the good work.

[00:27:36] H. Adam Holt: Well, thank you.

[00:27:37] Derek Notman: Yeah. Thank you.

I mean- You're welcome. I, uh, what do you think, Adam? I think, like, I, I have some pretty big feelings on this. How do you feel- Yeah ... about this?

[00:27:44] H. Adam Holt: You know, we've talked about some, some, we know a lot of our peers that have, don't wanna touch this one. All right? Because in many ways, whether we're promotive of the RIA movement or the IBD, the, uh, the independent broker-dealer, or the no broker-dealer, or no FINRA, or I'm just insurance, or, you know, this is an interesting one, and I, it's a bit of a third rail.

But just because we're who we are, we're gonna do it anyway. So- That's it, man ... I, I think we're gonna reserve this one for another full episode. In fact, I, I think we're gonna do it next, and we've got some interesting topics here. But I, I think the short answer, Rebecca, is that it is all about, uh, w- how you wanna run your business.

I, I think the, the general answer I would give is we have seen most of the, most of the friends that we know in the industry who have moved, let's say, to the RIA space, have done so out of aggravation. What has that aggravation been? It's almost entirely either process or compensation, right? Yeah. It's the perception that if I jump from my old house to my new house, what I'm going to give up is aggravation around I'm constrained on the tech I can use, or it's all antiquated legacy tech, and I really, and they're stopping me from using the newest tech, okay?

So I need to get independence. Or number two, the compensation structure doesn't align with the p- where I am. Okay? And I know there's a compelling reason to go do this. I will tell you at the end of the day- Wherever you go, you bring your problems with you. So if there are internal problems on structure, process, marketing, y- going independent means- They're not going

[00:29:18] Derek Notman: away

[00:29:19] H. Adam Holt: yeah, you, you have to actually get more diligent when you go independent, 'cause now all of a sudden you have things that you didn't know you were getting covered. So it's a m- it's really a matter of, of personal choice. Derek?

[00:29:30] Derek Notman: Yeah, and we'll definitely unpack this. I don't want to belabor, but I- Yeah ... I would say that when they g- you know, you just made two good points of why the main reasons people go independent.

And it wasn't about how I can, like, be a better person and advisor to my clients. Most advisors, advisors, whatever we're, we're using, right? Yeah. Whether you're fully captive or fully independent or somewhere in between, most of us are doing what's best for our clients anyways. We wanna help them. We're doing what we can.

And, um, so I, I would say that independence, um, doesn't define the advisor and the person. It's the other way around. At the end of the day- Mm-hmm ... it's the person that defines what type of advisor and how you work and everything. So we're gonna d- w- don't worry, Rebecca, we're gonna jump in and do a big one on this.

I know a lot of people don't wanna talk about it. It's debated, but we're gonna just rethink the heck out of it.

[00:30:22] H. Adam Holt: Yeah. Well, the point is that we, we throw out the, throw out the, uh, the debates, and then maybe we'll throw in in some opinions in there. But the reality is, is that the, the great thing about our industry is that it is changing, it's evolving.

Yeah. And we are seeing a lot of the legacy companies trying to catch up and, and sometimes leapfrog what's happening in the independent space. Um, but we'll debate that one. So thanks, uh, thanks very much for the question. We'll be sure to send you a shirt, Rebecca. Um, thank you. Hopefully you'll wear it proudly and say, "I was on this podcast.

At least my question was." Thank you again, uh, to Michael Kitces, of course, uh, for all- Oh, yeah ... he's done in the business, um, and for being willing enough to come on our podcast, um, as always saying.

[00:30:58] Derek Notman: Tremendous resource and a cool dude.

[00:31:00] H. Adam Holt: Yeah, very true. And thanks again for doing all this. And I

[00:31:02] Derek Notman: love his blue shirts, man.

He's always got the blue shirt.

[00:31:04] H. Adam Holt: I don't know how many blue shirts the guy has. But he, I don't know if you noticed, but he actually had an undershirt that was blue, the same color, so that's- I- th- he is committed to the blue shirt, uh, brand. So that is pretty awesome to see someone stick to the brand consistency.

Totally. Uh, something we can all learn from that. Derek, have a fantastic, fantastic day, and of course, I will look forward to talking with you on the next Rethink event. Yeah. Soon, soon. Thank you, Adam. All the best to you, my man. We'll chat soon. All right. Thanks, everybody.

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