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How to Survive the Rumor Mill in the Financial Advisory World


How to Survive the Rumor Mill in the Financial Advisory World

This is an industry where rumors frequently abound.

From headlines to hearsay, the stories start out as whispers then circulate fast and furiously. There are the ones that tell of a major firm being on the block or the others of a firm exiting the Broker Protocol. Each creates feelings of uncertainty and concern, and can lead advisors to speculate about what lies ahead. What makes it even more confounding is that sometimes there actually is some truth to the buzz.

So how do advisors know when it’s important to pay attention to persistent rumors (where there’s smoke, there’s fire?) and when it’s advisable to ignore the noise?

Consider these 5 points:

1. Rumors are speculative, but hindsight is 20/20. What may begin as a rumor sometimes serves to reinforce what an advisor has otherwise had concerns about. Take the recent sale of the National Planning Holdings network of broker dealers to LPL. It seems like half of the NPH advisors saw the writing on the wall months before the sale was announced and had been anticipating an eventual sale, drawing from the experiences of MetLife and AIG before them. These advisors began their due diligence ahead of the curve and are now at an advantage because they have adequate time to prepare for the future, including vetting their options.

Then there are times when advisors realize after the fact that – apart from rumors that may have been circulating – there were signs they had missed. For instance, there were rumblings for at least a year warning that wirehouse deals would be coming down from their highwater mark of 350%. But advisors were reluctant to believe that deals would do anything but continue to go up as they have for the past 10 years. Often it’s as simple as listening to your gut. So ask yourself, “Do the rumors ring true based on my experiences and an objective view of my firm and the current environment?”

2. Consider the rumor in the context of the plans you already have in place. Does the rumor confirm decisions you have already made? With the status of recruiting and deals in a state of flux, and the Broker Protocol the subject of some speculation, advisors who are committed to making a move in the foreseeable future may consider accelerating their timelines in order to better guarantee that they can do so under the status quo. For example, rumors that certain firms are planning to exit the Protocol are unsubstantiated and contrary to how important a priority recruiting remains to all firms. Yet those who know they have one move in them may still choose not to risk even the slightest possibility that they wouldn’t be able to move under the terms of the Protocol, the industry’s game changing document in support of advisors’ rights.

3. Have a Plan B, and even a Plan C, at the ready. It’s important to have a strategy: Think through what would happen if the rumor actually became a reality. What would be the result for you and your clients? If true, it may still not have meaningful enough impact to require action. Where it could have significance for your business, preparing a response – at least conceptually – doesn’t mean overreacting or acting prematurely. Change in this industry is happening at a faster pace than we have ever seen. Advisors don’t always have the luxury of time to respond leisurely to announcements of coming change. Advance preparation is key. Know what you would do, where would you go, who you would speak with first “in the event of…”

4. Sometimes rumors are an indication of public perception. Rumors can often influence reality and our thinking. Does the rumor reveal concerns about a firm that can have significance whether or not it’s completely accurate? Sometimes advisors have to address a rumor even when it’s likely without merit. This is an opportunity to understand where your firm may be vulnerable, or where there is headline risk even from “fake news”—that is, even when the rumors aren’t based in fact. Consider the speculation over the past few years that Bank of America will eventually take Merrill Lynch to a salary/bonus structure. Much of this stems from advisors simply wrestling with what it means to be owned by a Bank, even though it’s unimaginable that such a change would take place. Advisors would never stand for it.

5. Persistence doesn’t make it true. When you are satisfied that there is no substance to the rumor, or even if true, it wouldn’t cause you to take some action or do something differently, just let go of it. Don’t allow it to continue to occupy space in your head and unnecessarily distract you. Consider this: Within just a few years of acquiring PaineWebber, UBS was rumored to be up for sale by its Swiss parent, a rumor that has resurfaced almost annually since that time. But 10+ years later, few advisors pay any attention when the speculation resurfaces yet again, and have since learned to dismiss that it has any merit. In fact, most UBS advisors have mastered the explanation as to exactly why it’s so unlikely that they would or could be sold for the foreseeable future.

Related: How Attractive is Your Firm to a Seller?

The Internet and social media have paved the way for a treasure trove of “fake news” that spreads like wildfire. We have witnessed enough times in this industry that the unimaginable can happen, but this doesn’t mean that you should be a slave to the rumor mill, or allow it to influence your thinking. Consult a trusted advisor—someone who can help objectively separate fact from fiction and not contribute to the frenzy.  It doesn’t serve anyone to react out of fear. Use rumors as a reminder that getting educated on what your options are and having a plan B is smart and proactive—especially if you know that you couldn’t live with the worst case scenario.

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