Advisor Insights

The Rise of Non-Investment Advisors

Don Phillips

Investment advisors are being pushed out of the investment business. The trend started decades ago, and now with the advent of packaged investment products and their enthusiastic embrace by fund companies, individual investors, and even advisors themselves, the trend has perhaps reached its logical conclusion. Advisors have transitioned in both their own minds and in the public’s perception from being investment advisors to being relationship managers. Now, admittedly a huge number of activities occur under the financial planning umbrella, and advisors bring diverse talents to the table as they address a multitude of client needs. Still, the trend of curtailing the advisor role in the investment process is undeniable.

Decades ago, advisors often defined themselves as stock-pickers. Using either their own research or that of their parent brokerage firms, they would construct portfolios of blue-chip stocks and perhaps a few fliers for their clients. They would also ladder bond portfolios or pick a few municipal or utility bonds to add income to the portfolio. No scorecard of their success was kept, but the record was likely spotty. Eventually, the costs and limited diversification of these portfolios came to be seen as disadvantages, especially before deregulated stock trading commissions. Mutual funds presented themselves as a solution, and advisors shed their role as security selectors and adopted the new role of selectors and evaluators of fund managers.