Controlling What You Can, Learning From What You Can’t

Posted by Marcus Hagood on Apr 1, 2020 4:44:25 PM

Controlling What You Can, Learning From What You Can’t

“Instead of focusing on the circumstances that you cannot change—focus strongly and powerfully on the circumstances that you can.” –Joy Page

One of my favorite movies of all time is Casablanca. This 1942 American romantic drama is revered for its cinematic quality, lead characters, fantastic writing, and pervasive theme song “As Time Goes By.” It is set in a time of war, upheaval, and great uncertainty; in fact, the movie is the perfect foil for the underlying message that we control our fate through direct action. There are many scenes that highlight that message, but Joy Page was a part of one particular scene that foreshadows the ending of the movie and reinforces her thoughts as expressed above.

In this scene, Humphrey Bogart, playing the lead character Rick Blaine, tells the husband of a newly-wed Romanian couple to make a bet on the roulette table at Rick’s Café Américain casino. To summate the plot line, earlier in the movie, Rick had turned down helping the newly-wed wife played by Joy Page citing that he helps no one to avoid the suspicion of the Vichy police.

As the plot line continues, Rick has a change of heart and whispers in the husband’s ear to make a risky bet on the rigged roulette table. With a little help, the husband wins enough money to buy a passage out of Casablanca for himself and his new wife. The action that Rick takes in this scene foreshadows his later actions that free Victor Laszlo and his wife, Ilsa Lund, from the Germans and Vichy Police in Casablanca. The rest is cinematic history.

In times of uncertainty, it is always wise to focus on what you directly control, as pointed out by Ms. Page’s quote. Whether we look at current politics, markets, regulation, news, or the current state of the financial services industry, there have been (and always will be) many events outside of your control as a practice owner that affect your work. How do you deal with this constant noise? Recognize it for what it is and focus on the things you can control with direct action.

What You Do Not Control

Regulation Best Interest

Regulation BI was approved by the SEC in a 3-to-1 vote on June 5, 2019, and is scheduled to go into effect on June 30, 2020. It is the SEC’s replacement for the now vacated Department of Labor Fiduciary Rule. In its press release the SEC stated that “Regulation Best Interest will enhance the broker-dealer standard of conduct beyond existing suitability obligations and make it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail customer when making recommendations.” It is now being challenged in the courts, but it is currently still set for compliance by June 30th of next year. As did the Fiduciary Rule, this new legislation will have effects on the industry and the market for financial services practices. It certainly is less onerous on brokers and dealers but does require them to fully consider the circumstances before selling a product. Ultimately, this should have a similar effect on product sales-driven revenue sources that we observed in the marketplace when the Fiduciary Rule was put into effect.

The Race to Zero

With last year’s announcement of Schwab taking commissions to zero dollars, and the eventual capitulation of every major discount broker and custodian, there is a new reality for the expense side of your businesses. Although it may be true that some custodians and brokerage firms can offset the loss of commission revenues with the addition of more assets, it is difficult to see how this change to the competitive landscape will not potentially affect all financial service providers. If nothing else, it will continue to drive the industry toward fixed or asset-based pricing. I would personally not be surprised to see custodial and brokerage platforms reprice their services around a fixed or percentage of AUM-based fee structure.


With the race to zero fees for brokerage and continued new entrants on the robo-advisors front, it continues to become more difficult to compete for assets in the financial services space. With FP Transitions data as a guide, we have certainly seen fee compression over the last five years. Consolidation at the top end of the market for financial service practices—evidenced by mergers of “billion dollar” firms—and the continued graying of the advisor base will likely accelerate this competition for assets.


Our global pandemic pulled us abruptly out of an extended bull market where we had seen both portfolio values and firm valuations reach very high levels. Now as the market continues on its uneven path, no one knows what will come next. But, as our CEO Brad Bueermann wrote last week, no matter what happens with the market over the next couple of months, investors will continue to rely on trusted financial advice to navigate whatever comes next. As a business owner, the best thing to do now is to focus on what you can control–the operation of your business and the continued communications with your clients–as the key to handling current and future market adjustments.

Which brings me to what you do control.

What You Do Control


Hiring and maintaining the most qualified staff to assist you with servicing your clients and growing your business is a considerable challenge. In our work with advisors, we find that less than 15% have built long-term staffing plans that think to the future and provide direct paths to ownership for next-generational talent. It is vital that you benchmark yourself against reliable peer data so that you can accurately gauge how effective you are at the utilization of your staff. It is vital that you plan for client expectations and growth before it happens and that you are staffed accordingly to meet the demands it will put on your practice.


Having the correct business structure to operate and to best achieve your growth goals for both clients and staff is also in your control. An appropriate pass-through entity that supports long-term staffing, talent retention, and profitability is needed for a strong and sustainable business. This includes the formulation of compensation plans that reinforce profitability and staff retention, as well as organizational design that maximizes the strengths of your team to support your overall business growth strategy.


Formalizing a continuity plan that protects your business for an unplanned disruption is critical at this time, and should be on your priority list if you don’t already have one in place. Along with protecting your clients’ assets from an unexpected event, you’ll ensure your business and your estate are protected as well. Continuity can be achieved through an agreement with a colleague in your community, designating an intermediary to facilitate the sale of your business, or developing an internal transition of ownership. Continuity at any level is important and your business shouldn’t be without it for any period of time.


Creating a sustainable business that can be passed on to the next generation of owners ensures stability of operations, but also stability of value. Start with business structure and staff to create a solid foundation for long-term sustainability. Identify your key staff people, look critically at them as potential next-generational owners, and take steps to incorporate them into the ownership and leadership of your business. Strong sustainable enterprises are the best equipped to weather any headwinds and remain adaptable to market volatility.

In the final scene of Casablanca, Rick is forced to decide whether or not to take action. In spite of the underlying love story, the world at war, and Rick’s desire to stay neutral, Rick comes to the realization that only through action will he be able to solve all the problems of the world. Torn by his love for Ilse Lund and struggling with the realization that she still loves her husband, Victor Laszlo, Rick chooses to forgo his own happiness and focus on a course of action to get Victor and Ilse on the last plane out of Casablanca.

As Rick and Inspector Renault walk away into the fog, Rick says, “I think this is the beginning of a beautiful friendship.” FP Transitions is committed to providing valuable services, thought leadership, and expert guidance to assist you in making decisions on the one thing that you do control, your business. Ready for a “beautiful friendship?” Call 800.934.3303 or click here to schedule an introductory consultation.

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Topics: Commentary, Organizational Structure, Business Growth, Continuity, Talent Recruitment, Sustainability