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Tiburon CEO Summit goes high as talk turns to FANG factor on days one and two

The once-dismissed prospect that Facebook, Amazon and Google could enter wealth management was back on the front burner as advice business chiefs gathered and Google contributed to a panel

Wednesday, October 12, 2016 – 10:44 PM by Brooke Southall
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John Wotowicz: You have to build brick by brick.

Brooke's Note: The RIA business is nothing if not about the power of one person to project themselves into a force of financial good for individuals. Yes, this happens at the mom-and-pop RIA practice level every day. It happens, too, at the Ken Fisher level. It happens at the Chuck Schwab and Ned Johnson level. But the embodiment of that at the advice business executive event level is Chip Roame and his Tiburon CEO Summit  No institution could pull this off so well and for so long. TAMPs, custodians, RIAs, software, robos, IBDs, VCs and PEs large, small and rising are all well represented. Imperfections? No question. Anything better out there along these lines? Not even close. The good news is that though the event is maturing, Chip himself remains the ageless, exuberant uniter, so hopefully this franchise will stick around for the forseeable future.

The Tiburon CEO Summit comes at you in waves punctuated by lulls. But when a Big Barrel rises up, there are plenty of minds agile enough to see it for what it is and hang five on it.

This fall's version of Chip Roame's semiannual event at the Ritz Carlton in San Francisco -- an exquisite but airless chamber with killer Bay scape views inaccessible to dutiful conference session goers -- teetered between the banal, prosaic, oxygen-starved and the lofty, future transcending and inspiring.

Along with the rest of my reportorial kind, I was barred from the antechambers of conversation but put myself in the way of updates and some emails by parking myself and my laptop in the upstairs lounge. See: Chip takes a 90-minute rip at wealth management at the Tiburon CEO Summit

Attendees said Charles Schwab Corp. president and CEO Walter Bettinger's remarks were notable for where they didn't go -- to his company's high-net-worth strategy or to the company's grander technology plans. Bettinger reaffirmed his company's commitment to chop ETF fees to remain a low-price leader. He reiterated his opinion that robo-advice is but an arrow in the quiver of a broad-based advice and brokerage firm. See: Schwab launches biggest RIA-targeted price war in years -- but TD and Pershing say they won't play along

Still, Chuck Schwab's successor perked up the audience, sources say, by saying the future may contain more delivery of episodic advice -- namely advice on demand doled out in chunks timed with life events. It's not clear yet what Schwab's play on this trend might be, though the company does report on financial planning sessions delivered on its quarterly calls.The semantics around planning make this assertion about where "planning" is headed a bit hard to assess.

Top five threats

The idea of dispensing episodic financial advice, summit-goers pointed out, has a back-to-the-future feel in that stock and insurance brokers exercise a version of that in selling products and old-time financial planners, before they took on AUM, essentially delivered advice on demand. See: What Schwab's new 401(k) study tells about the demand for financial advisors to manage retirement assets

Bob Oros and RIA client, Relura Horton, after morning sessions Tuesday.

But if there was a meta-emphasis at this elite gathering in the luxury hotel cantilevered onto the side of Nob Hill in San Fran, it was the gravitational pull of the topic of the planet's five most valuable companies; the idea that Facebook, Microsoft, Apple, Amazon or Alphabet might make a play for a piece of the financial advice pie. It was a notion was embraced by some and utterly dismissed by others. (These online behemoths are often known by the acronym FANG: Facebook, Amazon, Netflix and Google. Netflix may not apply here, attendees say.)

Sources gave Alex Potts, CEO of Loring Ward, credit for sparking the conversation during the technology panel on day one.

Both sides make compelling cases. The naysayers point out that the possibility was already considered and dismissed  specifically at a Hearsay Social-Pershing event here in San Francisco in 2015. Credible reasons Facebook and Google won't become robo-RIAs and other things I learned at Hearsay Social-Pershing event in San Francisco. They also say that robo-advisors, for all their success, have hardly caught fire by Google or Facebook standards. See: Wealthfront's advice is now an employee benefit for Google employees' non-401(k) savings

Brian Strope, research scientist at Google, was among the attendees and spent time with Fidelity Clearing & Custody Solutions' David Canter as I ran into them.

Mike Sha, founder and CEO of SigFig, summed up his thoughts on the logrolling surrounding Silicon Valley superpowers barreling into wealth management: "Probably chatter -- there are much more directly complementary financial services areas they are likely to focus on first (e.g. payments). Don't think investment advice is on the shortlist..."

Case for FANG invasion

But on the long end of the second day of the event, Ron Suber, ‎president at Prosper Marketplace, put up a chart and made his case for why the Facebooks and Amazons may be en route to providing financial advice.

Suber's point was that these firms already have a big toe in the pond. Amazon, he says, offer business loans. See: Why Mike Sha has a 2015 goal of $1 trillion in robo-assets for SigFig and where Marissa Mayer fits in

Totum Wealth co-founder and CEO Min Zhang leans toward Suber's analysis and remarked that the relatively slow growth of Schwab and Fidelity in the robo business shouldn't be taken as a pure indicator of how well an Amazon would do. Though Schwab and Fido have good big data on investing behavior, they don't have the motherlode connected to broader patterns of buying behavior -- never mind the sheer web presence. 

I caught with Chip himself dashing for the sidewalk simply to take in the sunny day before resuming his duties.

"I think our top execs are underestimating how easy it is for the FANGs to disrupt financial services since they have the data, tech and resources," she said.

Zhang added that the Amazon and Facebook equivalents in China, under their own acronym, BAT (Baidu, Alibaba, Tencent) are further along the curve to wealth management -- a big clinical trial not likely to go unnoticed in the United States. See: McKinsey: Robo-advisors have a cloudy future but 'virtual advice' delivered by 24-hour super-centers with experts and algorithms will win the day

Aspiriant exec Michael Kossman cited an example that came up during the day: the ability of an insurance company to track premium pricing by connecting to driver behavioral data from Metromile.

Steve McLaughlin, managing partner of FT Partners, noted Apple Pay and eBay's purchase of PayPal. Steve was formerly a senior investment banker in Goldman Sachs & Co.'s Financial Technology Group.

A lot to build

Anton Honikman, CEO of MyVest, said the next wave will involve more financial services players paying more attention to personal data.

John Wotowicz, CEO of inStream Solutions, the financial planning firm whose clients include the 1,500 CPAs who use Buckingham Asset Management's DFA TAMP, BAM, says that though robos may advance, that financial planning is a further reach for them. Building an engine takes years and it fits with difficulty into their product set.

"You have to build brick by brick," he said.

Min Zhang: Top execs are underestimating how easy it is for the FANGs to disrupt financial services. 

Indeed, one such financial planning robo, LearnVest, hasn't been heard from since being acquired by Northwestern Mutual. See: The real reasons Northwestern Mutual paid a reported $250 million for LearnVest

Seen and heard

Even from my lobby vantage point from where I sat, stood and took photos, covering the Tiburon CEO Summit was like sipping from a fire hose. I caught Chip  himself dashing for the sidewalk simply to take in the sunny day before resuming his duties. Seizing the opportunity, I peppered him with questions about LPL Financial being shopped -- according to Reuters --  by Goldman Sachs -- an article I was banging out between interviews. See: LPL is for sale -- in whole or part -- and Wells Fargo at least makes the list of potential buyers

I caught Eric Clarke, president of Orion Advisor Services LLC, heading into the Ritz restaurant yesterday at lunch with execs from his Boston-based co-owners, TA Associates, and shared good wishes and heads-ups on upcoming dealings.

Tom Bradley, head of TD Ameritrade retail, came by and shook hands in his warm style. Bob Oros, head of Fidelity's RIA business, accompanied by Relura Horton, former colleague and now client and president of San Francisco-based Parallel Advisors, said hello and posed for a photo. Horton was a long-time Fidelity exec who leapt to the RIA world -- a microcosmic example of what continues to happen in the industry. 

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See more related moves

Mentioned in this article:

Tiburon Strategic Advisors
Consulting Firm
Top Executive: Charles Roame

Parallel Advisors
Consolidator/Roll-up Firm
Top Executive: CJ Rendic

Portfolio Management System
Top Executive: Anton Honikman

Buckingham Strategic Partners
TAMP, Asset Manager for RIAs
Top Executive: Alex Potts

Stephen Winks

Stephen Winks

October 13, 2016 — 8:28 PM
The truth is much if the innovation in support of advisory services and fiduciary standing entails the technological development skill set of the FANG companies, this is not a core competency of the brokerage business and completely circumvents the industry's cultural impediments to innovation. When you ask major firms how they will go about creating/developing a fiduciary construct, there are blank faces as it is outside their experience. In fact it has been heresy to even think in those terms. Now that brokers must play by entirely different set of rules if they are rendering advise--the burden is placed directly on executives who have no knowledge of prudent process, enabling technology and the retooling of product menus. The FANG companies are (1) fast studies, (2) understand (a) process and (b) technology, (3) how to necessarily be disruptive and (4) streamline cost--none of which are hallmarks of the brokerage industry highly opposed to the new prudent expert rules.. FANG companies may well be the solution. SCW

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