Pershing’s Chief Relationship Officer and a Managing Director, Jim Crowley, talks to WealthMangement.com on how client needs are driving change within the broker/dealer space, how firms should respond and the impacts of increased regulation and compliance burdens. 

WealthMangement.com: You’ve mentioned the importance of firms creating an exceptional client experience before, what does that mean for today’s clients? The firms and advisors?

Jim Crowley: The client or investor of today isn’t necessarily just looking for an exceptional experience when it comes to investment management, I think what they’re looking for is a more holistic exceptional experience. But I think in our industry we’ve still got a long way to go to create a truly exceptional experience.

Using myself as an example, I do expect to expect to have exceptional investment knowledge and effort put into my portfolio, I do expect exceptional experience around, more broadly, tax efficiency, creating a well thought out estate plan, making certain insurance coverages are correct, making sure my balance sheet is in good condition. 

They’re not just looking for, I’m not just looking for, an investment management performance against the benchmark, I’m looking for investment management performance against where I want to be 3 years from now, 5 years from now, 10 years from now. That’s really the mindset that’s changing broadly among most investors. And that’s different depending on the investor. 

What we’re seeing obviously, the more sophisticated the client, the more complicated their financial needs are and it does require the expertise of a team. So teams are very much going to be part of the exceptional experience process. And the subject matter experts that have to be part of that team are an investment manager, an estate planner and it is actually someone who is a service expert, who is going to make certain that all the paperwork is highlighted for clients with little signature tabs attached—make it very easy for clients, convenient for them. 

People are moving all over the place all the time. They want anywhere anytime access to their information. Yet there are some firms today who don’t give their clients access to their portfolio information. It’s just a non-starter. And even mature investors, the boomers, want access to their investment portfolio and what their team is working on, what’s next in the plan that they need to be preparing for to make certain their affairs are in position. 

WM: How do firms and advisors go about creating that experience? What are some key takeaways for folks to keep in mind?

JC: Creating an exceptional experience is something I think the leading firms really are focused on and they are doing it through listening to their clients, listening to their advisors. If you really do listen well to your employees and you listen to our clients, they’re going to give you the feedback straight.

One thing I’d highly recommend to people, and we did this, is to get groups of associates together in a room with the senior executives. We did this for 90-minute sessions and what I did as facilitator for many of the decisions was general introductions and then spent 5-10 minutes talking about the strategy of the company. Employees, associates, teammates, want to hear what executive management is thinking relative to ‘this is the strategy we’re taking and this is why we’re taking that strategy.’ Bringing people together in these groups and sharing that information brings them right into the inner circle and now they know where you’re headed and they feel better about that.  

WM: You’ve talked a lot about what clients are looking for from their firms, but what are firms looking for from their partners like Pershing? What’s top of mind?

JC: Firms are concerned with several things. One is they’re concerned with regulatory change and how to mange through regulatory change—money markets, Department of Labor, fiduciary, those are three pretty big things. From a processing standpoint, there’s CARDS [FIRNA’s proposed Comprehensive Automated Risk Data System], there’s large trader, there are those things that are happening that may not directly impact them, but indirectly impacts their organization. 

Clearly, for us, it causes us to commit resources to being in compliance with those regulations. Ultimately, we, like the regulators, hope that the cost-benefit of doing these things have the intended outcome we all want and have a return we all like. 

The concern that come organizations have is that the regulatory pendulum has swung too far and that it’s causing others to invest differently. Firms without question have had to increase compliance staff, they’ve had to bring on technology solutions do do sales surveillance, investment management profile verification and several other different things. They’ve has expand compliance and that’s changed the economics of their business post-crisis. 

WM: While we don’t know yet what the full cost of the regulatory and compliance has been for the firms, how is this current climate impacting the industry?

JC: Given how our industry has, frankly, managed to damage our own reputation through the snafus even post crisis, whether it is a system failure on an exchange or an IPO offering that doesn’t go well—those are all things that have caused investors to have, I wouldn’t say a crisis of confidence, but it hasn’t done anything to help their confidence in our industry. 

We as an industry have to embrace and shape regulatory change. But at the end of the day, the only way we’re going to change this crisis of confidence with investors is doing it one client, one advisor at a time. 

There’s no magic silver bullet that’s going to change that. So we as an industry really do have to focus on care and nurturing of investors’ confidence in us. And largely, that’s what the regulators are tying to do, restore that trust and confidence, I know Rick Ketchum has been speaking about that. But it isn’t always through regulation.