While the new Congress is already fighting to kill or delay the Department of Labor’s fiduciary rule, many broker/dealers are staying the course with their plans to comply with the rule. Advisor Group is one, but the independent b/d network is going one step further. While the fiduciary rule only applies to retirement accounts, the brokerage is creating a consistent best interest standard of care across all retail and qualified retirement plan businesses.
“Whether the rule goes into effect April 10 as planned or is delayed, which we see a lot of press around, we are all operating in what we’re calling ‘the fiduciary era,’” said Valerie Brown, executive chairman. “We’re very supportive of that, and we’ve developed this platform to position our advisors to be successful within that context.”
Advisor Group, with 5,000 advisors across four independent b/ds, recently got out from under the thumb of AIG when it was sold to private equity firm Lightyear Capital and Canadian pension fund manager PSP Investments.
“We believe this new platform will appeal to other independent firms that are affected by the trends that are driving industry consolidation,” Brown said. “The only reason we could do this is because we’re able to leverage our scale; we have investors that are very focused and supportive of growing the business and investing in it to do so; and we worked collaboratively with our clearing firms and partners across our industry.”
Unlike some firms in the industry, Advisor Group will continue to support commission-based business. Merrill Lynch, for example, has said it will ban the use of commissions in retirement accounts.
“Others in the industry have decided to maybe limit choices on the platform, and we announced on Thanksgiving—and we’ve made it a premise of our platform—to maintain choice on the platform,” Brown said.
But the firm is creating level fees across the platform that will support a best interest contract exemption for the firm's advisors. The firm announced a bundled $15 all-in transaction charge on its brokerage platform.
All the nuisance fees, such as confirmation fees for every trade, mailing, statement fees, etc., are bundled into the one flat fee.
“In the past, we’ve had various charges for various things,” said Jamie Price, president and CEO.
They’ve also introduced a new mutual fund–only, no-transaction-fee platform for commission accounts, where they’ve eliminated IRA custodial fees and nuisance fees. It’s aimed at helping advisors and clients more easily consolidate holdings onto the brokerage platform.
On its advisory platform, the firm has also switched to a reduced, bundled flat fee of $9, which again eliminates all nuisance costs.
Advisor Group also added a new advisory product, called Genesis Series, a turnkey wrap program that gives clients access to institutional strategies from Vanguard, American Funds and iShares at a lower minimum of $5,500. It’s powered by Envestnet PMC’s research. While this a new capability, previously clients would have had to have at least $50,000 to $100,000 to start an advisory relationship.
“We thought it was something that was missing in the industry, and we thought it was an opportunity for our advisors to serve all accounts—including related accounts, where today, they can’t get them," including, perhaps, children of the client.
The firm is currently on a 19-city roadshow introducing advisors to the new platform. Executives plan to meet in person with over 70 percent, or about 3,500, of their advisors. The next stop is Tarrytown, N.Y.
Advisor Group has a total of about 5,000 advisors across four b/ds: Royal Alliance, SagePoint, Woodbury Financial and FSC Securities.