Breaking away is one of the biggest moments of an advisor’s lives. So much can go wrong and so much can go right. One of the most daunting aspects of breaking away is losing the infrastructure of a large firm, especially the tech infrastructure. So much of the success of breaking away depends on giving your clients a great experience during the transition, so choosing the right infrastructure is crucial. In order to avoid making a mistake, it is crucial to hire a consultant who specializes in the area. They will be able to tailor the tech you should get to the unique needs of your clients and your firm.
FINSUM: This is a very good idea as one of the biggest headaches (and potential sources of nightmarish stories) is making poor tech choices. Checkout LibertyFi, a specialist consultant in the area.
One thing about the wealth management landscape that has never made much sense is how JP Morgan is not early as big a player as one might expect given the overall strength of its brand. Morgan Stanley and Merrill Lynch hog all the AUM and attention, with JP Morgan and Goldman Sachs mostly on the outside looking in. Well, that may be about to change, as JP Morgan is now planning some big changes to its wealth management business. According to the WSJ “The bank is creating a unit that will combine its U.S. wealth-management operations for affluent clients and the Chase branch network’s financial-advisory business”.
FINSUM: This sounds like a plan to go after mass market wealth management like Morgan Stanley or the Thundering Herd. Could be a big play.
Expectations of higher compensation and more “freedom” usually top the list of articles that discuss why advisors are breaking away from large brokers. However, there is more to it than that. An interesting piece in Financial Planning tells the story of a team breaking away from Merrill Lynch. In reality it is not just comp that is an issue, and it s rarely the sole reason for breaking away. Often times it has to do with institutional limitations, like corporate bureaucracy, a bad branch manager, or small clients getting funneled to call centers. Other times it is because advisors are offering tons of service, like tax planning, cash flow management, loan refinancing etc that they just don’t get paid for.
FINSUM: This is a good piece that goes deeper than usual in exploring the real reasons advisors leave and whether doing so is a good idea.
One of the first big changes under new Goldman CEO David Solomon is becoming clear. That first major move is in wealth management, where Goldman is attempting to push much more broadly into the market. The bank plans to launch a robo advisor to get people with as little as $5,000 to invest to join its offering. Goldman has traditionally gone after very wealthy clients ($10m+), so this is a major change of pace for the the bank and is more in line with its recent increased focus on mass market savings products. A senior figure at Goldman explained “It’s a pipeline for future clients” to allow them to “experience the Goldman Sachs’ way”.
FINSUM: Goldman seems to believe it has stretched the high end of its market (big corps and UHNWIs) as far as it could go, and this is just the next logical area for growth. The challenge here is that we don’t think the Goldman name has the same cache with the mass market that it does with the HNW market.
One of the big worries on small RIAs’ minds right now is whether Schwab is going to leave them out on an island to wither. Small RIAs have always been the bread and butter market for TD Ameritrade, but with its recent acquisition by Schwab, that could all change—such is the fear of the small independent shop. However, Schwab has taken a couple of moves that seem to indicate they are not going to forget about the group. In particular, they have hired Tom Bradley from TDA, who for years ran TDA’s RIA custody business, to lead the new combined effort.
FINSUM: There is still a good degree of doubt over whether Schwab will mainly focus on its institutional clients and large RIAs, but this is a sign that Schwab is not likely to forget about its small RIAs.
One of the leading trade bodies of the brokerage industry has just put out an alarming, and frankly logical, warning. SIFMA says that a growing body of regulation is threatening to completely end the brokerage industry as we know it. In particular, SIFMA says the rise of state-based fiduciary rules is likely to lead to the “lowest common denominator” regulatory solution in many states. Instead of trying to navigate a complex network of rules, the solution is simply to say “we do not have brokerage in our state”. Many states may only have advisory accounts, which according to SIFMA will mean "Clients will have one choice they can buy, which in many cases will be buying more services than they wanted and having to pay more than they wanted to”.
FINSUM: So anyone in the industry will realize that trade bodies put out warnings all the time. What makes this different is that it seems highly realistic, which makes it quite troubling. The reality is that for many clients brokerage is the right model, so it needs to be defended.