ML might force me to start an RIA

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Jan 25, 2009 11:58 am

I am a ML FA who recently graduated the training program.  Since then, my numbers have gone down because I moved a significant portion of my MLPA assets to cash (before October) and I have not brought in much new business.  With all of the changes going on at ML/BoA, I suspect that I might find myself in the same predicament as the current POA/PMDers.  In case I am given two weeks to move on, I would like to better understand my options and the potential implications to my U-4, licenses and designations.  I have my 7, 66, CFP® and CRPC®.

At this time, I think my most likely option would be to go off on my own and start an RIA firm.  Are there any suggested resources (other than the search button, Fidelity and Schwab) to dig deeper into the RIA option?

If ML gives me two weeks to find a new job, how should I time things?  Should I leave ML before the two weeks and start the RIA or should I let ML terminate me then start the RIA?  I’m concerned about what is best for my U-4 and what is best for being able to approach my old clients (i.e. protocol).  

I don’t currently plan on having any other RRs work for the RIA firm, but I’m thinking that might be short-sighted of me.  With many talented, licensed and trained people losing their jobs, maybe I should have a few other RRs under my firm’s name.  What precautions should I take for those who either involuntarily leave their firm or voluntarily leave their firm?

What other potential issues and pitfalls are there that I should be concerned with?  I have some bankroll and an office space.  I might even have a small (individual) private equity firm who is interested in being an angel investor or having me found a wealth management division for their firm.

If I am not given my walking papers, I plan on staying with ML and toughing this merger out.  Even if I didn’t plan on toughing it out, wouldn’t I have problems with protocol if I left to start an RIA?

Alias (not my real name)

Jan 25, 2009 1:46 pm

Your problem is that you are a cfp. Cfp's tend to not do well in the real world, away from discussion forums. 

Jan 25, 2009 1:49 pm
Hank Moody:

Your problem is that you are a cfp. Cfp's tend to not do well in the real world, away from discussion forums. 



Thank you for the advice putsy...very helpful!

Should I just not renew my CFP so that I can have a chance in the real world?  Is the problem that I'm a fiduciary to my clients and that I always have to act in their best interest?

Alias

Jan 25, 2009 2:13 pm
Alias:
Hank Moody:

Your problem is that you are a cfp. Cfp's tend to not do well in the real world, away from discussion forums. 



Thank you for the advice putsy...very helpful!

Should I just not renew my CFP so that I can have a chance in the real world?  Is the problem that I'm a fiduciary to my clients and that I always have to act in their best interest?

Alias

 
Yeah that's it...self righteous CFP...
Jan 25, 2009 2:15 pm
Alias:
Hank Moody:

Your problem is that you are a cfp. Cfp's tend to not do well in the real world, away from discussion forums. 



Thank you for the advice putsy...very helpful!

Should I just not renew my CFP so that I can have a chance in the real world?  Is the problem that I'm a fiduciary to my clients and that I always have to act in their best interest?

Alias



Ditch the cfp mentality and become a salesman. Figure out what people want to buy and sell it to them. Start doing that and you won't get fired anymore for not being able to produce.

Jan 25, 2009 4:03 pm
Hank Moody:

 
Ditch the cfp mentality and become a salesman. Figure out what people want to buy and sell it to them. Start doing that and you won't get fired anymore for not being able to produce.



Fair enough point.  Do you have any insight to any of my questions about starting an RIA firm?

Alias

Jan 25, 2009 7:50 pm

Before you get completely married to the idea of setting up your own RIA, you might want to at least take a good hard look at the various B/D's who will allow you to collect fees as an IAR and also handle traditional commission business and insurance business as well.  That way you can offer more options to clients, and there are more potential sources of revenue for you too.  Operating as a rep under their corporate RIA will also mean quite a bit less work to get things set up so you can focus on getting your clients transferred over and up and running.

You might also want to consider focusing on the self-clearing indy b/d's, as that would allow you to hold 'most' assets in the same place rather than dealing with seperate entities for broker/dealer and clearing.  That will be most similar to the administrative structure you deal with now.  RayJay and LPL definitely fit that description, and I think Stifel also has an indy channel b/d...Century might be the name?

Jan 25, 2009 8:05 pm

"Is the problem that I'm a fiduciary to my clients and that I always have to act in their best interest?"


Do you actually believe that holding your CFP makes things different?



Jan 25, 2009 8:17 pm

Heck no! Read my original post and not Hank's response. I'm looking for information. I don't think any of you care about my designations.

Jan 25, 2009 8:39 pm
Alias:

Heck no! Read my original post and not Hank's response. I'm looking for information. I don't think any of you care about my designations.




I'm sorry that you found it necessary to be a cfp to make yourself act in the client's best interest. The rest of us do it because it is part of our character.

Jan 25, 2009 9:23 pm

Wow. Alias is asking for some career advice guys, not whether you feel his designation makes him superioir to you. Obviously you do and are not happy about it.


Alias... you are likely safe. Having graduated from POA you will be spared the initial cut. If you can gut it our you're probably better off waiting before you consider a move.
 
If you feel you must leave or are forced to leave, consider joining an existing independpent practice and continue building your practice.
 
I don't think you have the critical mass to go independent on your own right now.
 
Full disclosure....I am former wire BOM, now independent. Best of luck this week,
Jan 25, 2009 9:23 pm
Hank Moody:
Alias:

Heck no! Read my original post and not Hank's response. I'm looking for information. I don't think any of you care about my designations.

I'm sorry that you found it necessary to be a cfp to make yourself act in the client's best interest. The rest of us do it because it is part of our character.








...gotta go find a paper towel to wipe up the coke I just spewed all over my computer monitor. Good one Hank.

Jan 25, 2009 9:57 pm

Coke is probably easier to clean up than what Hank spews on his keyboard.

Jan 25, 2009 10:41 pm

Northfield will clean it up... HEY CFPs are best at everything.. including failing out...

Jan 25, 2009 11:57 pm

You spew thinking about my mother?  I have seen a picture of your wife so I understand.

Jan 26, 2009 11:08 am

Alias,

What (approximately) is your AUM & current production?  How long have most of your clients been your clients?  What is your breakdown of fees vs. commissions?  Is your business mostly MFs, managed money, or what?  What support staff would you need?

Finally, when you ask for information other than the search button and Schwab/Fidelity, does that mean you have already made full use of those resources?

Jan 26, 2009 6:50 pm

I have literally seen a picture of your wife so I understand.  How did the kid happen?  Drunk?

Jan 26, 2009 7:04 pm
Morphius:


What (approximately) is your AUM & current production?  How long have most of your clients been your clients?  What is your breakdown of fees vs. commissions?  Is your business mostly MFs, managed money, or what?  What support staff would you need?



I have 8MM annuitized with a velocity of 115 bps.  I have almost no commissioned based business but I do have about $5MM of non-producing assets that might eventually generate a transaction charge or move to annuititzed.  75% of my business is individual stocks and bonds.  The rest is MFs (closed and open) and index funds.  I also do quite a bit of options, mostly covered calls but some spreads and collars.

My biggest clients have been with me for two years and have already told me that they are a customer of "alias" and not a customer of ML.

I might not need new support staff.  The private equity person that I mentioned in my original post would share his support staff and office space with me.  I also have a office in my home that is more than suitable for client meetings.

Morphius:


Finally, when you ask for information other than the search button and Schwab/Fidelity, does that mean you have already made full use of those resources?



I've used all three of the resources but I need to revisit them to build upon the knowledge that I've gained since my original pass.  My biggest questions are regarding my U4 and protocol.  It would stink to leave and then not be able to contact my clients.

Alias

Jan 26, 2009 10:58 pm

I just have time for a quick response now, so this might be a bit rough.

While you need to plan your exit carefully, you should not be overly concerned about either your U4 or protocol if you go RIA.   Assuming you exit cleanly, there should be little likelihood that your current b/d tries to ding you there, and frankly even if they do, that won't matter much if you go straight RIA (and drop your FINRA licenses).  All you'll need for RIA in most states is your S 65/66.

With regards to protocol, there are a couple ways to handle your exit to minimize the chances of encountering any significant problems from your current b/d, regardless of whether the protocol applies.  If you get legal help with the set up of the RIA and exit, which you should, you should be fine, especailly at your asset levels.  In the final analysis, you need to be careful but as long as your clients want to stay with you, you'll be fine.  This is still a free country.

Just be very careful what you say to any clients about actually leaving.  To the extend you say anything, make sure it is hypothetical, as in "if I should ever decide that the best way to take care of you and my other clients would involve a change in firms, I would not hesitate to do that, even though I would not be able to give you any advance notice of that because of legal concerns."  You owe a legal duty of loyalty to your current firm as long as you are employed.

Also, it would be great if you could reduce expenses by sharing office space/support staff with someone else, but I would really caution you against agreeing to take on an equity partner unless you can't survive financially otherwise, and that shouldn't be the case if you control rent and staffing costs, which are typically the two largest costs.  Don't give away equity if you don't have to.

Finally, make sure you are very clear on the distinction between what many brokers call "annuitized" assets (such as C shares) versus those assets on which clients are already accustomed to paying an actual advisory fee.  It may feel the same to you, but they are not the same in terms of an easy transfer and start up.  Especially with your AUM level, you can survive but you won't have much room for any error.


Jan 26, 2009 11:21 pm

want the best advice EVER in the business

ever?



dont read the paper

dont go to message boards

dont worry

dont project



JUST GET ON THE MF TELEPHONE AND CALL STRANGERS.......



aint fun



its the only thing that works in this biz