SmartBrief recently caught up with William A. Coppel, Managing Director and Chief Client Growth Officer for First Clearing Correspondent Services, to discuss the future of clearing as well as other trends and research affecting the financial services industry. What follows is an edited version of that discussion.
What does the future of clearing look like?
We are taking the clearing business in a new direction. While independent broker-dealers are still going to need the traditional services we’ve always provided to run their businesses, today it’s all about growth and growing their firms. We believe First Clearing is in a unique position because we can leverage the knowledge, the experience and the intellectual capital as well as the operational resources of a large-scale, stable financial institution with deep experience in serving the needs of brokerage firms — namely Wells Fargo Advisors. This is going to help us help our firms remain relevant and competitive in the marketplace.
What I say to folks today is that we’re really in the brokerage business. We just happen to clear because it’s a function that we need to provide in order for us to process our business. First Clearing, in the future, is all about innovation around growth. That means helping firms grow organically, helping them differentiate their business in a changing financial environment, helping their key assets — namely their advisors — keep up their skills in ways they may not have envisioned before, so they’re able to serve the needs of affluent investors today. It also means sharing our collective wisdom about managing risk and navigating the regulatory environment so that our firms can continue to protect their businesses effectively, while growing.
We believe that the work we’ve been doing to empower clients to grow is redefining the clearing space. Just one of our innovative programs — called Growth AcceleratorSM — has been shown to give advisors the skills they need to meet the changing expectations of affluent investors. These days, affluent investors are less concerned about what an advisor knows about products and financial data, because the internet has made that kind of information ubiquitous. Instead, affluent investors are looking for advisors who can build a relationship and learn more about them — the investor.
We can bring our collective insight to bear in other key areas, as well, from business planning and succession planning to relationship marketing and relationship management. We also offer expertise in risk management relative to new technology. So that’s how we see the state of the business.
Which aspects of regulatory reform efforts will have the greatest impact on the future of clearing?
One is that client firms are going to turn to us more to help them deal with the impacts. The good news is things are moving relatively slowly. The changes associated with Dodd-Frank have not necessarily come to fruition. Some have, and it’s cost a lot of money to put in place the systems to meet the regulatory requirements.
We’re in a unique situation at First Clearing because, in addition to the 88 firms we clear for, we support the third-largest brokerage firm in America. So we’re focused on building the systems and support to meet requirements around transparency and documentation. All of us in this industry face the challenges of meeting both Congress’ and regulators’ expectations.
From an operational standpoint, what overall trends are advisors trying to navigate right now?
It boils down to three things:
- They’re trying to balance between the old way of doing business — which was really a job of selling products and accumulating lots of clients — with this notion of looking clearly at their practices and deciding which are the right clients for them, whom are they best-suited to serve, and how do they organize themselves operationally to do that. So the days of having 700-800 clients in your book are really outdated. For an advisor to be effective today, it’s really boiling down to having probably 100 really good relationships with families, and organizing themselves around that.
- They’re looking at and trying to process, from an operational perspective, the phenomenon of social technology and social media. We know that it’s here. We know that it has had a major impact on how we do business — and I mean that broadly – on how we gather information, where we go for information, how we ideate and how we exchange information. So while it’s had a major impact, we’re still trying to figure out best practices for the use of that technology. Given that ours is a highly regulated industry, running off blindly into the night is not the right approach. The odd thing that we’ve learned is that people often assume we know more about them than we do because they’re on Facebook or have a LinkedIn profile. They expect us to know more about them. We’ve got to figure out where social media fits into that.
- Succession planning. Perhaps it’s an overused term, but advisors are trying to navigate the whole notion of ‘What’s my next move?’ When you look at the advisor population, the average age is north of 50. The question is, how long do I continue in this business and what should I be thinking about relative to transitioning to another aspect of my life? I don’t use the “R” word anymore because I don’t think people ever retire. The reality is that we’re all going to continue to be active for the obvious reasons. And the question is, how do people transition their lives from this business?
What are some of the specifics things Generation Y clients are looking for in their interaction with financial advisors?
This is an of our business that is much more profound than I think people realize. Traditionally, we looked for the people who had money. So you waited till they got to be in their late 40s or early 50s. What Gen Y represents is a larger generation than the Baby Boomers. There are more than 80 million Gen Yers in the U.S. They are also a significant component of the global population. We’ve spent a fair amount of time looking at Gen Y and working with Jason Dorsey from the Center for Generational Kinetics, so I’ll share some of the insights we’ve discovered.
Gen Y represents the greatest lifetime value of any generation in today’s marketplace and the question is: How you get to them?What we’re finding statistically is that Gen Y doesn’t feel as though they’ve reached adulthood until 30. The Boomer generation probably felt that way in their early 20s. Understanding that gap is significant because Gen Y views the world differently than Boomers. It’s a huge stumbling block because most advisors are Boomers, and they end up trying to have a conversation about what they think the Gen Yer is experiencing or needs.
For instance, showering a Gen Yer with a lot of printed material about all the things you could do for them will likely turn them off. Gen Y develops close relationships through electronic media, whichthe Boomer generation never did. Many advisors judge that. They question how one can possibly create a relationship unless through it’s a face-to-face meeting and a handshake. That can be an advisor’s blind spot.
Gen Y also tends to rely on other Gen Yers for advice and guidance. They’re somewhat communal in that sense. They are likely to turn to a friend or friends electronically to get a point of view about anything — including financial services.
And there’s a presumption out there that Gen Y folks don’t have a lot or haven’t accumulated a lot of wealth. But the reality is that it may have taken them longer to get started, but they are on a trajectory where it’s important to start thinking about the future.
How have Growth AcceleratorSM and Envision® evolved to help advisor keep pace with the changing dynamics of the marketplace?
Several years ago, our Growth Accelerator program started as a practice management program. It to helped advisors better organize and position themselves to articulate the value they create for their clients. The program has broadened since then. Today, it addresses across-the-board skills that advisors need, from engagement competencies to understanding the mindset changes of affluent investors post-2008 — investors who are not looking to be sold, but who want a trusted relationship.
We’ve been able to measure the success that we’ve had with Growth Accelerator. . We tracked about 80 advisors over a two-year period to get a sense of whether the skills and the best practices we were instilling had any impact on their businesses. What we found was that those advisors who participated in the Growth Accelerator program were outpacing the non-participants 2-1 in terms of their ability to manage more assets .
What dovetails nicely with this is the Envision process, which creates a framework to hold a conversation with a client. The process focuses on what the client is trying to achieve with their life as opposed to what the advisor has to say about investments. The conundrum of our industry is we have things to sell to people, if you will, but the reality is that our mission should focus on helping clients succeed financially.
This is where Envision comes into play. It helps identify what’s important to the client . Then it builds a plan that addresses their assets and invests those assets to meet the client’s objectives.
Any final comments you would like to add?
My entire career has been spent on the retail side, and I believe that we, at First Clearing, are in a different category than the ‘clearing business.’ We support the firms we have partnerships with by looking at them through three sets of lenses: that of a business owner, that of a financial professional and that of a client. If you align your vision and thinking in that order — and start by understanding what the end client needs to be successful financially, then build backwards — you have a higher probability of being successful. I think that makes us a very different business than we’ve been in the past.
William A. Coppel is Managing Director and Chief Client Growth Officer, First Clearing Correspondent Services
Bill leads First Clearing’s organic growth and adoption initiative in the role of Chief Client Growth Officer. As Chief Client Growth Officer, he is responsible for managing a team of Growth Consultants who work one-on-one with client firms and their advisors to develop unique programs that support the increase of financial advisor productivity and overall firm growth. Bill also oversees First Clearing’s brand and market position by leading a team of seasoned communications and marketing professionals.
Bill is active in the industry, having served on the Financial Services Institute Broker-Dealer Conference Task Force and the SIFMA Membership Committee, and was a long-time member of the SIFMA Sales & Marketing Committee. He is a member of the Wells Fargo Advisors Management Committee and First Clearing Senior Management Committee. He holds a bachelor’s degree in political science from Fairfield University, an MBA degree from Olin Business School at Washington University in St. Louis, and is a graduate of the Securities Industry Institute at the Wharton School, University of Pennsylvania.