Jud Bergman’s 4 New Rules for Advisors That Supplant the Old

The Envestnet Advisor Summit kicked off in Chicago Wednesday afternoon with a welcome from Ron Fiske, conference chair and managing director for strategic partners, to the standing-room only crowd at the Westin RiverNorth hotel ballroom. After Fiske told the 550 attendees, including 330 clients of Envestnet, that the theme of the conference was “Changing the Rules,” he saluted those clients by saying that “you’re changing the rules,” before handing off the stage to Envestnet CEO Jud Bergman.

Bergman (left), whom Fiske called a “true visionary” and who is a member of Investment Advisor magazine's 2012 IA 25, explored how exactly the rules have changed for advisors, contrasting the “Old Rules” with the emerging rules that are now and will, in the future, shape how advisors serve clients. The Old Rules:

That investment firms are best able to determine the proper disclosure and pricing.

That New York-based investment firms attract the best advisor talent.

That “big spends” on legacy systems ensure that advisors would have access to leading wealth management technology.

That Modern Portfolio Theory simply applied creates value.

Bergman then suggested what the four new, emerging rules are and how they have changed the conversation and business realities for advisors. The New Rules:

That practice standards are evolving, particularly when it comes to the fiduciary standard for advice givers.

That advisor independence is a superior, less-conflicted business model.

That emerging technologies will bring about holistic end-client relationship management.

That MPT, thoughtfully applied, still works.

Going deeper on these new rules, Bergman told the crowd a parable about the fiduciary standard, and with a nod to HighTower CEO Elliot Weissbluth’s “butcher” analogy.

Bergman talked about a baker friend of his whose products he frequently buys, after he asks her, “What’s good today?” The products are good, he explained, but the baker never tells him that “you’re putting on a little weight, Jud, maybe you should have a low-fat smoothie” instead of her baked goodies. “She’s never recommended to me” that he do anything else than buy her wares. But end clients remain ignorant, he said, citing research that 66% of HNW clients think their brokers operate under a fiduciary standard. “We know that’s not true,” Bergman said.

As for emerging rule number two, he recalled that at Envestnet, when “we started 12 years ago,” our goal was to “enable the independent [advisor] to compete with the wirehouses.” Admitting that it took “six or seven years to gain parity” with the wirehouses, he felt confident that Envestnet’s wealth management platform now empowered advisors to compete.

Bergman than argued that Envestnet is helping to change the rules through becoming the “leading provider of integrated wealth management solutions,” and that integration of new capabilities through its three most recent acquisitions—FundQuest, Prima Capital and Tamarac—would allow it to enhance its offerings to advisors.

As for next steps beyond the integration of those acquisitions, Bergman suggested that a “next generation UMA” would be one of those enhancements to its platforms. When asked by the audience, through Fiske, what he considered the most important challenge for advisors, he said “we think it comes back to the fiduciary versus suitability” issue. Those advisors and their partners who work through that issue “in a client-centric way” will do well, he predicted, in the age of the new rules.

Envestnet had held much smaller conferences for advisors for several years but had suspended them seven years ago, but this gathering is on a much larger scale. In addition to the strong number of attendees, the Advisor Summit included 38 exhibitors and sponsors for the conference, which Fiske mentioned had sold out by January and a well-received opening keynote speech from Oakland A's general manager Billy Beane of “Moneyball” fame.

The Advisor Summit also was the venue for a rebranding of Envestnet, which includes a modernized logo, a host of attractive marketing materials and clearer messaging for a company that is sometimes not clearly understood by the marketplace, and a revised website, all orchestrated by Envestnet Chief Marketing Officer Marion Asnes.