Displaying items by tag: RIA

(New York)

There are many reasons to change firms, whether that means going independent, jumping between brokers-dealers, or moving from RIA to RIA. In all the talk on recruiting one of the elements that often gets lost is how certain firms can or cannot help you grow, and this fact is doubly true in the RIA space. Most of the discussion around joining RIAs has to do with freedom, better income, and better services for clients, but one narrative advisors need to think more about is whether a firm actually has the power to help transform your growth. Most advisors don’t really think too much about an RIA’s brand power when moving because the main focus is on the freedom to run their own business. In reality though, some RIAs have much better capabilities for really boosting client acquisition and aum growth than others. For example, does an RIA have a particularly strong view on the markets, or a unique marketable approach to investing? Do they have a well-developed network/infrastructure for COI referrals? Other factors, like how strong their actual marketing support is, are all critical to whether joining that firm will help you win new clients and grow your business.

FINSUM: Whether you are already at an RIA or thinking of joining one from a B-D, advisors need to think carefully about how a particular RIA’s brand and offering may help them grow. It can be a major differentiator for success.

(New York)

COVID has affected the wealth management business as deeply as any other industry. Disruption has arrived, but opportunity has also come with it. But how will it impact the recruiting environment? By all accounts, it looks like the next six months or so will be an ideal time for advisors to move networks/companies. Firms are loosening purse strings and are jumping head first into recruiting again as periods of upheaval like COVID have usually led to increased movement among advisors. That means advisors are likely to get bigger checks for moving now than they would have earlier this year. The lack of conferences also means they are putting more money into other efforts to reach advisors.

FINSUM: Generally speaking, the COVID environment seems to have been beneficial for advisors. New efficiencies and work/life balance have been found as a result of working from home; deeper bonds with clients have been formed during the crisis; and there are increasing opportunities for recruiting. The speed of the market recovery has also been beneficial.

(New York)

Breaking away is a tense process for advisors. Not only is there the emotional “fear gap” about venturing into the unknown, but even considering the move is difficult. One of the major reasons why is that it is hard to know how much your comp might increase or what kind of deal you might get for moving. Advisors often ask themselves “what does my business need to look like in order to make a successful move?”. Well, here is some insight. Larger firms, say with $5m+ plus in revenue can easily afford to make the transition and hire all the consultants necessary to make a successful switch. However, the less known reality is that even solo advisors with between $50m to $100m in AUM can be very successful in moving. Payouts for such advisors can approach 80%, meaning those bringing in $500k of revenue can reasonably hope to keep $400k of it. As a rule of thumb, advisors’ take-home pay usually jumps 10-15 percentage points when breaking away from a wirehouse.

FINSUM: This is very useful information. We drew it from a number of sources, including Kitces.

(New York)

If you are considering going independent, Charles Schwab has an interesting new survey for you. Thousands of advisors have been flowing out of wirehouses and large regional brokerages over the last few years. They have either gone completely independent or joined independent broker-dealers. In either case, a new survey from Charles Schwab shows that such advisors are very happy. In fact, 90% of advisors who have gone independent report that they have no regrets about their choice to go it alone.

FINSUM: The reality is that most advisors say that whether you become an RIA or go to an IBD, you can serve clients better and make more money at the same time. The general opinion is that with an RIA you lose a lot of structural support, but you keep everything for yourself; while with an IBD you keep more structural support and still get much higher payouts than at a wire.

(Washington)

The SEC’s Best Interest rule is still being digested by markets. It contains some potentially big changes, including the definition of fiduciary duty. The DOL is yet to release its new Fiduciary Rule, but it will reportedly work smoothly alongside the SEC’s rule. One of the questions that has arisen in this context is whether under the new rules it may be increasingly easy for fiduciaries to accept commissions. The idea of fiduciaries accepting commissions is generally a big no-no in the current paradigm, but top industry lawyers like Fred Reish see this loosening under the new rules. In particular, it is seeming as though broker-dealers could accept commissions when offering fiduciary advice, but the jury is still out on RIAs.

FINSUM: This is just one of the many new changes that are on the horizon. The combination of new rules will likely create grey areas, risks, and opportunities that are not yet apparent.