All Articles Finance Q-and-A: FSI Chairman Joseph Russo on the virtues of being an independent advisor

Q-and-A: FSI Chairman Joseph Russo on the virtues of being an independent advisor

3 min read


Joseph Russo is chairman of the board of directors of the Financial Services Institute. He has more than 30 years of experience in financial services and is chairman and CEO of Advantage Financial Group, an affiliate of National Planning Corp.

Why are independent financial advisors on the rise?

American investors understand the value of independence. They know the difference between an advisor focused on their needs and one focused on the directives of an investment banking arm who may be pressured to cross-sell the product of the month. Industry data bears this out. Wirehouses’ share of advisory assets declined to 41.1% at the end of 2011 from 47.8% at the end of 2007, according to Cerulli. Investors are voting with their dollars, and the independent industry is winning.

Independents understand that a client’s trust isn’t simply earned once — it has to be earned every day, by adhering to the highest ethical standards and placing the client first at all times. We understand this because our livelihoods depend on it. It’s simple: If we lose our clients’ trust, we’re out of business. This perspective is what allows us to develop long-lasting, often multi-generational, relationships with our clients.

Does being an independent advisor mean greater accountability to investors?

Of course! Independent advisors have created a culture of compliance that regulators and lawmakers fail to recognize. Too often, policy and regulation is driven by anecdotal encounters with bad actors, rather than the best interests of investors. The extreme regulatory burdens placed on independent advisors fail to take into account our industry’s abiding commitment to compliance, which often exceeds that found at bigger firms.

For our industry to remain healthy and viable as a crucial source of independent financial advice for Main Street Americans, lawmakers and regulators need to understand our business model and the culture of compliance that drives us. They need to understand the vital role we play for investors, and see the strength of our commitment to clients.

What should other advisors know is critical to their business success in the future?

They should know that collective advocacy through well-organized industry associations like the Financial Services Institute (FSI) is vital. As individuals, we simply cannot yell loud enough to make our message heard in Washington and the states. Working together through groups such as FSI gives us the concerted, focused voice we need to make our case. And it gives us the strength to stand up for our interests when regulators and legislators choose not to take our views into account.

If you are an independent financial advisor, there is no need to watch in isolation as legislators and regulators in Washington and elsewhere determine the future of your business. By getting involved in industrywide advocacy organizations, you can make your voice heard. For our industry — and our clients — to thrive, we must continue to work together to secure a more business-friendly regulatory and legislative environment. Our clients’ well-being and our livelihood depend upon it.

This question-and-answer session was produced as part of SmartBrief’s 2012 Best Of reports, which capture the year’s most important stories in each industry. Sign up now for FSI Newsbrief to get tomorrow’s report on the top must-read stories from the financial industry.

Image courtesy of the Financial Services Institute.