By Knut A. Rostad, February 18, 2019

Originally published in Advisor Perspectives

Never mind the State of the Union speech. Last week two RIA leaders made important remarks illustrating the public’s distrust of financial services. TD Ameritrade’s (TDA) president and CEO, Tim Hockey, and Pershing Advisor Solutions CEO, Mark Tibergien addressed trust at different forums in different ways.

Hockey set policy at his LINC conference when he stated TDA will not compete with its 7,000 RIAs. Tibergien spoke bluntly on what’s keeping new talent out of the industry in a Linkedin interview. He cited three false perceptions that hurt industry recruitment: you needed to study finance; you need to sell; and the industry is “corrupt.”

“You hear those words repeated on social media and people develop this image and you have the Gordon Gekko’s of the world reinforce this image,” he explained. The corrosive influence of bad behavior by high-profile firms on the search for talent in the RIA industry is clear, according to Tibergien.

Corruption implies criminal behavior. According to the Oxford English dictionary, it is “dishonest or fraudulent conduct by those in power, typically involving bribery.”

Tibergien is clearly frustrated by the injustice. “The vast majority of people [in the advisory industry] are true and honest and ethical and good people and they are functioning in a way that is making a difference in peoples’ lives,” he said. “We have to somehow control the narrative and get people thinking differently.”

The Pershing exec suggested a message for advisors to counter these perceptions. ”We want to make a difference in our communities. It’s not just about our firm or our clients.” He concluded, “Think about how transformative that is for people to think the organization they are dealing with really wants to make a difference in peoples’ lives.”

Hockey addressed a different trust relationship – not between advisors and investors, but between TDA and its advisors. The question: Will TDA’s commitment to providing retail investors the tools to manage their own investments morph into TDA’s creating their own holistic financial advisors? Does TDA intend to compete directly against its own 7,000 custodial RIAs?

It’s not hard to imagine the range of possible answers that Hockey could have offered (but did not) that would have left RIAs uncertain as to TDAs’ intentions.

Hockey took the opposite approach. In his clarity, he replied, figuratively speaking, ”No! Damn, no!” The immediate reaction from advisors suggests he hit a raw nerve.

ThinkAdvisor reported, “TD Ameritrade CEO Tim Hockey received a roaring round of applause from advisors Thursday morning after saying that the brokerage firm is “not going to try and compete in the same space as RIAs.”

Financial Planning added, “It takes a lot to get jaded RIAs cheering at a conference. But (these) comments made by TD Ameritrade CEO Tim Hockey at the firm’s annual conference had them whooping and clapping.”

Hockey did not stop at setting out TDA’s policy. He went further and did something unheard of in financial services. He publically acknowledged a shortcoming. He said TDA was not clear enough in the past about TDAs’ plans or intentions. “I feel we’ve been ambiguous on this point in the past,” he said.

Hockey publically set out the policy in plain language and concrete terms. The policy defines a key point about what putting assets at TDA means. TDA decided to avoid an obvious conflict of interest that would undermine its relationships of trust and confidence. The policy underscores its commitment and undivided loyalty to its RIAs.

Washington Post columnist Robert Samuelson wrote in December about the public’s distrust of Washington political institutions. Trust, the Harvard-trained political scientist says, means, “You keep your word and are who you claim to be.”

The importance of distrust of finance may seem minor against distrust of constitutional institutions. It isn’t. The remarks and actions of Tibergien and Hockey remind what RIA leaders can do to rebuild trust – irrespective any Gordon Gekkos.