From the Boiler Room to the Living Room

Mitch Anthony

For the past decade I have been a front-line eyewitness to the birth pangs of an industry being reborn, an industry wrestling with what it was, what it is, and what it must become to remain relevant in the culture it serves.

Metamorphosis is a very good word for what has been happening. The old, original model crawledfor the last decade it has been in various stages of cocooning and is just now beginning to emerge as a species capable of greater accomplishment. The original model for our industry was cast from the boilerplate of the boiler room. The blueprint was designed by manufacturers and vendors who wanted to distribute product through various producers ; their first and foremost consideration was constantly increasing production .

In a sales culture, the emphasis isfor better or worseon the providers bottom line, not the clients. What have you done for me lately ; Smiling and Dialing ; Turn that conversation into a sale ; and Get your numbers up are all motivational mantras from the boiler room archetype.

But a funny thing happened on the way to the top-producers club.

Products and processes were commoditized at an accelerated rate due to the proliferation of information on the Internet. Prices began to fall, never to recover, and product brokering value propositions were left flapping in the wind.

With an early recognition of the evolution from salesperson to professional advisor, many apt and conscientious providers began to identify the need for a better and more holistic process and, in their search, found their way to certified financial planning (CFP), certified insurance counselor (CIC), and various other courses of learning and distinction in order to raise their knowledge, increase their competency, and elevate their standing in society.

Industry scrutiny came with all the subtlety of a searchlight at midnight (some would say it was overdue and some would say it was overdoneperhaps both are right) and left an industry saddled with a labyrinth of paperwork, restrictions, and paranoia.

What began as a company-centric sales industry is now evolving, rather quickly, into a client-centric service industry. Products are still involved but they are no longer the primary point of conversation. Product pushers are flailing futilely at this change-up pitch, swinging far too early in the conversation, only to look foolish for doing so. The products now must complement the service, which is based largely on intellectual capital and relational competence, not on the product of the week. The smilin and dialin aficionados are becoming dinosaurs, and nobody wants to follow in their tracks.

The money conversation began to change as well. People who were once simply expected to call clients with investment ideas were now expected to share solutions and strategies and engage in number-crunching processes. Then, out of the blue, they were suddenly expected to have life-centered conversations and to discover who their clients were and what mattered most to them. Who had time for this?

Many senior executives in this industry have articulated to me their recognition of this evolution and their frustration with trying to teach old dogs new tricks and in trying to figure out what type of person they should be recruiting for the futurethe future being not yet clearly defined.

These are the birth pangs of an industry being reborn and recastfrom the boiler-room to the living room. The cocoon has already begun breaking. We are seeing glimpses of what will come forth. It will be a greater creature than what previously existed, but not without a struggle.

The difference between evolution (what naturally evolves over time) and revolution (what is forced to happen in a shorter time) lies largely with volitionthat is, the will of the people to make it so.

The democratic system that our country now enjoys was inevitable. Such was the opinion of our founding fathers who decided to force the issue. Why should men not be free to do with their lives as they wish without interference from the privileged few? This thought inspired a band of republicans to demand better and to settle for nothing less.

There is a strain of democratization at work in the current revolution that I see taking shape in financial services. People have a right to know exactly what is happening with their money, who is profiting from it, who is telling the truth, and who is playing games with their livelihood. They will no longer settle for being sold or manipulated for someone elses gain.

If we were to draft a client bill of rights, it might help our policies meet the test of conscience and might include the following:

A client has a right to advice that is advisory in nature and not a euphemism for the product of the month. A client has a right to a competent and concerned professional who respects the sacred nature of their hard-fought earnings. A client has a right to transparency around all fees and costs, up-front and back-end included. A client has a right to be understood as a person and not just as a number. A client has a right to trust that the custodian of their wealth will preserve and conscientiously protect that wealth for the sake of survival and living well.

Until recently, the financial services industry was not ready to hear a message that delved into the emotional, meaningful, and soulish implications of the financial advisory business. But the confluence of 9/11, a sobering bear market and revelations of corruptive conflicts of interest has provided the perfect storm that has turned the industrys focus back to building meaningful and lasting relationships with clients.

This is a time for turning things inside out, for examining the innermost soul of an industry that has held the hopes and dreams of hundreds of millions of people in its stewardship and has often failed in that stewardship.

I believe the financial services industry is being turned inside out for good reason. Too many games have been played with assets that represent peoples lives, hopes and dreams, and quality of life. We all understand that money is a serious topic, but too often the institutions that claim to know the seriousness of the topic have demonstrated otherwise in flippant, foolish, and even felonious fashion.

When trusted institutions and fraternal organizations are found to be exploiting their members and clients and self-serving at the trough of their clients travails the time has come for deep industry-wide soul searching. If, as Aristotle said, the unexamined life is worthless, how much more worthless is the unexamined industry. The financial services industry has been duly examined from the exterior by the courts and the fourth estate, and now the time for internal examination arrives where a new and genuine to-the-core type of industry and professional can emerge and be recognized.

The financial services ranks are filled with great thinkers and generous hearts that have seen the writing on the wall for some time. They have been doing their best to reshape, reform, and reframe their firms, their offerings, and their advisors value propositions. Many of these revolutionaries are fighting extreme uphill battles within their organizational cultures, which cannot perceive how to exist outside of the boiler room template. I have seen a few of these good men and women tire and leave the battle but know of many more who have dug in their heels and are determined to lead their firms in and through this metamorphosis period. Once the industry sheds this cocoon and realizes what it can be, we will all benefit: client, advisor, and firm alike.

Excerpted from From the Boiler Room to the Living Room: The Financial Services Revolution and What it Means to You and Your Clients by Mitch Anthony (2008 Mitch Anthony. To be published by John Wiley & Sons, Inc. in September.)

Mitch Anthony is the founder and president of Advisor Insights Inc. and The Financial Life Planning Institute, training companies serving advisors and the financial services industry. He is the author of several books for advisors including the StorySelling for Financial Advisors . His newest book, From the Boiler Room to the Living Room: What the Coming Revolution in Financial Services Means to You and Your Clients will be published by John Wiley & Sons in September. Anthony is a contributing editor for Research magazine and Bank Advisor magazine, and his column Financial Life Planning appears in Financial Advisor magazine. He has been a named a Mover & Shaker by Financial Planning magazine and is frequently quoted by the media as an expert on financial life planning. His radio feature, The Daily Dose. is heard every day on approximately 200 radio stations nationwide.

2008 Mitch Anthony

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