New reason to watch your back

The biggest threat to mutual fund guys may not come from angry clients after all, but from an even closer source.

New reason to watch your back
An advisor moving to flat-fee financial planning suggests mutual fund suppliers will inevitably go direct to consumer as a result of CRM2, putting traditional salespeople in jeopardy.

“If you are ‘selling funds’ you are history in this business,” says outspoken Ancaster, Ont., advisor Kevin O’Brien. “You should be focusing on honing your financial planning skills and not your sales skills. I see a future whereby the suppliers of funds will deal directly with the public.”

He joins a growing chorus of advisors suggesting some mutual fund providers would have little choice but to opt for disintermediation of advisors as a way of satisfying investor concern over MERs and embedded commissions.

O’Brien believes that the future for most professionals like himself (a certified financial planner) is in providing advice and not product. Financial planners will be paid for doing financial planning and commissions will disappear.

“CRM2 will come into play just as the markets have or are due for a correction,” he argues. “Many fund companies will bring out their own line of ETFs and they will flaunt ‘smart beta’ as their value add.”

Yesterday WP ran a story discussing the changing fee models in the U.S. where many advisors are moving away from the traditional fee-based model charging a percentage of assets under management to a quarterly retainer based on a client’s total investable assets. 

At the same time we also featured an article about UK crowdfunding success BrewDog, a Scottish craft brewer that’s recently raised almost $10 million in the span of 20 days as part of its continuing expansion without listing on the London Stock Exchange.

The two stories taken together point to the changes in compensation currently taking place within financial services, suggests one analyst. With new sources of direct-to-investor funding models cutting out the advisor middleman it’s become increasingly difficult for mutual fund salespeople to make a living selling mutual funds.

“I see a very changed market place,” says O’Brien.