I am doing due diligence. Presently at a Agewachafargo and getting our ducks in a row just in case our team decides to leave. Looking at other wires and regionals, but decided to look at going Indy as well just to make sure we won't ever say 'I wish I would have...'. Team is multiple members, $1mil+, and able to run an office.
I was cold called by a recruiter that turned me on to VSR (Versar) out of Kansas City. Attractive feature they have is that they clear with First Clearing, so my clients wouldn't see a change in statements or account numbers and my computer system wouldn't change. What are the negatives? Who else should I talk to, and where else should I look to find more about the Indy route?
I’m pretty sure about this but you will proabably want to check - even though they have the same clearing firm each b/d is going to have their own unique account numbers w/first clearing. Statements will probably look the same but you will have to go through the whole ACAT process and your clients will have different account numbers.
[quote=moleary] I’m pretty sure about this but you will proabably want to check - even though they have the same clearing firm each b/d is going to have their own unique account numbers w/first clearing. Statements will probably look the same but you will have to go through the whole ACAT process and your clients will have different account numbers.
Same thing with companies that clear through National Financial (i.e. Fidelity). You can work between two BDs that clear through the same firm, and they still charge an ACAT fee to move the assets.
No matter the clearing firm, I agree with the comments above… the account numbers will change, and there will be an ACAT fee.
Question - if you are a capable multi-person, nice revenue group, is there a reason why you are still thinking about staying in the BD world? As far as I’m concerned, I’d really consider doing a full review and at least consider setting up your own RIA… with more people, it just makes sense.
Good questions. Our first reply would be that our product mix is not 100% fee based (20% fees, 30% trails, 50% various commissions) and my impression of the RIA world is that is must be 100% fees. And secondly, as you can see from my first reply is that we don’t know much of the real world of the RIA business having grown up in the B/D world. Convince me…
Yeah… the RIA world is fairly ‘fee only’, with the exception of a BD relationship that you might maintain on the ‘side’ of your RIA. The only thing to consider is…
1.) The potential of converting your trail business to institutional share classes, and charging an external advisory fee. More often, than not, you’ll find that the operating expenses will be less. I think you will find a willingness among some fund families that WILL allow you to convert a C-share fund to an A-share or institutional share class on the Fidelity platform, without a tax liability to the client.
2.) Fee business isn’t really a problem, obviously.
3.) Not sure what to say about your existing commission business… I think it’s always a good discussion with the commission-based client to try an establish an appropriate fee for your service… if you can convert it to an asset-based fee, it’s a good way to go. Most of our clients, during that discussion, understood what we were trying to do.
When we left Wachovia, we did the same analysis… we were much more fee-based at Wachovia than you were, but we also had some clients that paid trails that were better off in an advisory relationship. Also, if you have clients in retirement accounts paying c-share expenses, the explanation is rather easy and there is obviously no issue with tax consequences, etc.
I don’t like having a firm between me and my revenue. We custody everything through Fidelity, and having the ability to keep 100% of my revenues, while spreading the responsibility among my partners for firm management and responsibilities, is a good mix. Lastly, we trade a large groups of portfolios in discretionary portfolio models… you can trade a large groups of accounts simultaneously within 30 minutes, giving you time to focus on other things.
We grew up in the BD world also… there was a point where we couldn’t stand it any longer, and we just left. I feel for the advisors stuck with Wachovia, but it truly is your choice to stay, or go. 5 of us chose to leave almost 3 years ago following the merger between Pru and Wachovia. It was truly the right decision.
Don’t discount the RIA route without talking with someone from Fidelity or Schwab. Run the numbers concerning what you could charge some of your commissioned accounts, examine your trail business, and see where you could convert. It might give you several more options to consider.
Fidelity does offer a bundled RIA/BD platform known as ‘Hybrid One’ - you might give them a call and see if it’s worth your time. I know that it doesn’t essentially combine your BD and RIA businesses, however, I do think it allows for a bundled technology platform for the management on both sides of the business - both commission and fee.