Wachovia Finet

As a matter of fact, I had dinner last night with a buddy of mine that I trained with at one of the major wire houses back in the 90's.  He then spent some time working at another wire house before making the transition to FINET a few years ago.  He had a lot of insight for me about how that model, which is relatively new hence the small amount of reps in that platform, has changed in just the short amount of time he has been associated with them.  He said that ever since the merger with Pru it seems like they are running the platform more and more like the Wachovia Private Client Group.  They send out an annual survey to his clients that he has no control over - that doesn't sound like he is running his own private practice to me.  There is less autonomy now than when he first joined.  He said that when he looked at FINET and LPL when he was first doing their due diligence, they ran neck and neck.  According to him, FINET does not feel 100% independent anymore.  In fact, they just met with an LPL recruiter recently.  He said he knows of a Wachovia rep doing $900k that was looking at moving to the FINET channel and he would have to incur a 15% payout cut over the normal FINET payout for 3 years.

For the AG guys, FINET and the other platforms according to him, is the carrot they are dangling in front of you.  He has heard that they won't open that platform up to you unless you are doing $1 million+, and you can't have access to that platform and receive the retention package as well.  So, if you take the retention package, you put yourself 7 years out from doing FINET.  He did say that there may be a window for $500k+ advisors to go that route, but said there would be a significant payout reduction for 2-3 years - maybe in the 60% range.

I think you have better options on the independent side available to you if you truly want to be independent and if you don't want to expose yourself to all of those uncertainties.  If you put yourself in Wachovia's position, it a rep would be much more profitable to them in any other channel they have except FINET.

Hope this helps!

I can't speak for reason as to why you should or should not choose Finet if your currently with AG Edwards, but I can attempt to answer your questions.

The main reason there are only 500+ FiNet advisors is because the platform has only been up and running for 5-7 years (I believe).  Secondly, their reps have a much higher average trailing 12 cmn versus their competitors (i.e. they are much more selective in who the bring on board).  From memory....FiNet's avg producer is $400k plus whereas, Raymond James is approx. $250k and LPL is somewhere less than $200k.

If you do discretionary portfolio management (where you act as the manager - not farming it out to a third party), then FiNet is really your only logical choice.  They allow you to pay an admin fee that is all inclusive with no ticket charges on the management of the accounts.  Whereas, RJ and LPL each have ticket costs associated with each trade.

For example:  If you have 100 accounts under discretionary management and you decide to buy IBM, you will pay on average a $26 ticket charge per account at LPL and RJ.  That is $2,600 each time you make a buy or sell.  This makes in uneconomical. 

However, at Finet you can pay a max of 35 basis points with no ticket charges.

In my opinion, this is a huge advantage that FiNet has over the others.

I have spent a ton of time reviewing FiNet, LPL and RJ.  LPL and RJ are quite similar, but for me FiNet takes the cake.  In addition to what I mentioned above, the culture of the company is fantastic.  I have several friends who left a major wirehouse and went to FiNet and they could not be happier.  They love it, their client's love it and they are making some serious coin.

I am surprised that more people on this forum are not in favor of FiNet over LPL and RJ -- my only guess as to the reason for that....not many on this board qualify for FiNet production levels.

I would love to hear what others think and if there is something different than what I posed in the comments above about the ticket charges.

Whomitmayconcern is a good person to talk to.  He is with FiNet and apparently quite happy with them.

To be fair, they have their advantages.  I simply felt they were outweighed by the disadvantages, so I chose LPL.  I was concerned in part about the cultural evolution described by pghkid above:

"He said that ever since the merger with Pru it seems like they are
running the platform more and more like the Wachovia Private Client
Group.  They send out an annual survey to his clients that he has no
control over - that doesn’t sound like he is running his own private
practice to me.  There is less autonomy now than when he first joined. "

Actually FiNet has been around far longer that a ‘few years’.  It’s the evolution from Wheat First’s “Profit Formula” semi-indy platform, which became part of Wachovia when they bought First Union(who had originally bought Wheat First).

To correct the poster above, if you purchased IBM as in his example, the ticket charge would actually be $12 per trade, not $26.  That’s quite a difference if you’re managing a lot of accounts.

joedabrkr -

How do you figure it would be $12 per trade?

I just met with the LPL guys and spend a ton of time on this.  They did show me a way that you could get the cost down to $22, but no one ever said anything about $12 per ticket charge.

Even if it was $12 per ticket, that is $1,200 everytime you buy and $1,200 everytime you sell - that is on top of the wrap fee you charge the client.  I do believe you have the ability to pass it along to the client, but I don't see how that would fly.

If you make 12 trades per year (only one per month) that equates to $14,400 per year per account in comissions + the wrap fee.

Doesn't seem economical to me.

LPL and RJ are not for portfolio managers - they are more for brokers that are assets gatherers and those that farm the assets out to third party managers.

I stand corrected.  The ticket charge for a stock trade is $15.  I don’t know how these guys are coming up with a number of $22.

Oh, and for what it’s worth, you can push that ticket charge back out to the client.  You don’t have to pay it.

"I do believe you have the ability to pass it along to the client, but I don't see how that would fly."

Well, it does fly.  I have exactly ONE client that had a problem with this and forced me to a SAM II to get the client.  Also, $26.50 is the MAX mutual fund trade.  Many are only $5.50/trade...some are $13.00/trade, and Joe's right...stocks are $15/trade.  Most clients don't care about the little nuisance charges...we're the only ones that really make an issue of it.  The clients just care about service and performance...and it's mostly service.

By the way-from what I recall when I made a detailed comparison about 3 years ago, Wachovia had a higher ‘retention’ of the management fee before payout in exchange for no ticket charges.

joedabrkr-

You are right, FiNet does have a higher retention of the mgmt fee before payout in exchange for no ticket charges.  It is an extra 35 bps on the small accounts, but goes as low as 10 bps on accounts of $500k or better.

However, this still greatly works in my favor because I am a fairly active portfolio manager.  In my example above I used only 12 trades per year...in actuality, my models trade well over 100 times per year.  So the ticket charges (if even $15) would eat me (or my clients) alive.  Thus, the extra admin charge by FiNet with no ticket charges is the way to go for me.

In my analysis, I have seen that FiNet is the best for a portfolio manager.

LPL and RJ (don't know much about any others) are best suited for advisors that farm the management of assets out to third parties.

One thing I do like about RJ is that you have the ability to run your fee based portion of business through their RIA and the rest of your business through their broker/dealer.  This allows you to charge your clients for the financial plans that you create for them.  I have long thought that my clients would happily pay for the financial plans I do for them.  At my current firm, or FiNet I can not charge hard dollars for planning.

If you don't mind sharing...who out here is with FiNet?  Please feel free to Private Message me if you do not wish to post.  I would love to visit with you about the platform.  TIA.

You're right about one thing...trading costs would be a much bigger deal to you than me...I probably trade 6-7X a year max in a typical client account, as they are mostly fund managers with a few stocks/bonds mixed in here and there.

Try Whomit, to start with, also, if you search on Wachovia and Finet, there have been at least a couple of others on here at one point that mentioned one or the other.  The problem with finding then, is that you're looking for 500 vs about 10,000 now at LPL and between 3-4000 at RJ.

[quote=maverick/goose]

However, this still greatly works in my favor because I am a fairly active portfolio manager.  In my example above I used only 12 trades per year…in actuality, my models trade well over 100 times per year.  So the ticket charges (if even $15) would eat me (or my clients) alive.  Thus, the extra admin charge by FiNet with no ticket charges is the way to go for me.

It is actually quite easy to understand if you know portfolio management.  It is called partial positions.  I do discretionary portfolio management where I may initially take a position of 3%, then add to the position as the market warrants.  Conversely, if a position appreciates significantly I may sell 1/3 of the position at one point, selling another 1/3 at a later point etc.

It is not unrealistic management.

Call it what you want, but I would put my track record up against your mutual funds of choice any day.

And then, as soon as you tell me how great your mutual funds are....my BS meter will be flashing "condition RED" no doubt.

I never said a think about my mutual funds.

Oh, and I know a little about discretionary management…since I’ve been doing it for about 7 years now.

After stripping out benefits and adding back ticket charges, admin, resource fees, etc.  Finet equally as profitable to Wachovia as employee model. 

At least thats what WS has been telling AGE managers as they come into StL for recent merger visits.   100 managers in STL two weeks back.

[quote=GoingIndy????]After stripping out benefits and adding back ticket charges, admin, resource fees, etc.  Finet equally as profitable to Wachovia as employee model.[/quote]

Then why the hell won't Wachovia let AGE reps go to FINET?!!  Given the increase in payout I have as an indy compared to the days when I was a bank broker, I call this complete BS.  Wachovia wants to keep AGE reps in the more profitable model...why else would they block migration to FINET?

[quote=Indyone]

[quote=GoingIndy???]After stripping out benefits and adding back ticket charges, admin, resource fees, etc.  Finet equally as profitable to Wachovia as employee model.[/quote]

Then why the hell won't Wachovia let AGE reps go to FINET?!!  Given the increase in payout I have as an indy compared to the days when I was a bank broker, I call this complete BS.  Wachovia wants to keep AGE reps in the more profitable model...why else would they block migration to FINET?

I am with FINET. I have had a good experience. There are tradeoffs with FINET just as with any independent firm. To answer the question about the client survey, you can opt out if you do not want your clients surveyed. However, they are asking questions about your service and you firms service. I for one do not mind this. If you hired a consulting firm to do this for you it would cost alot of money. The payout at FINET is not as good as LPL or Raymond James. But they do not have group health insurance plan or a national name brand like Wachovia. Like it or not some of my clients like seeing a large company name on their statements. I do feel completely independent with FINET. If you want to stay transaction oriented then I would look somewhere else. If you want to be mostly fee based then I think FINET has the best platform. Take a look at them they have alot to offer. I looked at several independents and I was just concerned they would go the way of AG. I think that Wachovia has very deep pockets and FINET is here to stay.

Thanks for a fair and balanced assessment…this is what this forum should be about…

Yes I own a Finet branch.

Here is what I like about Finet's system. In my branch (which I private branded in case I ever want to fire Finet, which is what independence is all about, that you are able to sit in the same place and change firms instead of having to leave 'a' to go to 'b' if you and your firm have a falling out. The fact that Finet knows that I, and all of us, have that capability keeps them trying to provide value for our dollar. But just like I'm a businessman, I have to be grown up enough to accept that WSFN is in business to make money too, and they're in the business of not losing money, therefore they need to make sure that I'm compliant with a set of policies designed to keep me out of arbitration. Even though I 've never been there, and even though I carry E&O, they are still going to wind up on the complaint as the deep pocket, and if you're firm isn't doing the same, then someone in Shoboygan might be shuttering your B/D right now.) Right now I have two guys that work for me in my branch on split FA numbers. All their supervision is done at the regional level. I still own the branch, I still have exposure because all trades have my number on them, but I share the risk with the firm, at no cost to me.

I think this is great. It's a very workable compromise which makes it possible to recruit from the wirehouse without expecting the prospect to become his own indy (which is more work and more confusion than most wirehousers are going to be comfortable with, especially when I am competing  with 100% up fronts and 20 deferreds). And that I can do this AND Wachovia will throw some money at the deal (which, if it's 40% it's around what the broker made last year before deductions and then you throw a solid net payout at them 50 to 60 percent and everybodies happy!) makes for a solid partner in my growing firm.

I've said here many times before that the only real reason to go Indy is to be able to leverage your office so that you have people making you money whether you show up or not. This is the essence of business that goes back to the first apprentice... goes back to the first farmers with sons, if you have a lot of sons, you can farm a bigger area and sell what you don't eat. Anyway...

70% 85% 90% who cares? the trick is when you're getting 100%+ payout based on the total of the shared #s! That's when it starts getting nice.

Let me give you this example (and invite any retiring broker to take advantage of it) Say I have a broker doing 400M. He wants to retire. I go get a $200M "failure" from a wire, getting a 25% payout. I'll give him $100M of the $400M and a 40% payout. To the retiring broker, I'll give 4 years of 20% payout override on the new guy's book (up to the $300M) therefore he's getting $60,000 per year. I do that 4 times and what have I done? I've turned $400,000 in production into $1,200,000 (of which I'm keeping between 10 and 25% net) After 4 years I bump the noob to the 60% (which keeps him from saying "I'm going Indy"). Wachovia can handle that. Can the others. I don't know, but I do know that WSFN  is the sort of partner that I think will be here to help me achieve this goal.   

Are there others that are cheaper? Are there others that are less restrictive? Are there others with more brokers? Yup, yup, yup. Maybe some day I'll be interested in talking with them. But right now I'm building my business on a rock solid foundation.

You can PM me to say hello, but I'm not a PM type of person, I'd rather keep everything out in the public eye (just my style and it has served me well over these many years.)

To the Finet AgE/Pru question.

I've had several Pru guys over the years call me asking if they could join. It's unfortunate that they were not greenlighted.

It reminds me of when Shearson and Smith Barney joined. I was at a meeting and I asked a Barney guy what he thought of the "merger" and his response was 'Great! now there are several thousand guys I can't steal clients from!'

I've heard several justifications of why they don't want guys going from B&M to Indy. What I think they want most is to make sure of two things; first that every Tom Dick and Harry with a beef with his BOm doesn't think he'll be able to just leap with no repercussions. And second, the the Indy platform doesn't just become the first step in a Texas Two step as brokers go "Indy" and then go to the next wirehouse with all the clients bulk transferred.

It's a problem that they'll have to deal with.

Thanks whomitmayconcern - very insightful and just the type of information that I am looking for.  One of my goals is to build a network of brokers just as you have.

I too feel that WSFN is a great choice for what I am looking to do.  I haven't made the switch yet, but am impressed with FiNet.

Keep up the good information flow.

From a AGE FC thinking about Finet, Thank you Whomit. Someone said something about reduced payouts if you make the change, have you heard anything about that?

I have not, but I think it makes some sense in that the branch will want to be made whole for the money they put into brokers.

I think that there may be an accomodation if you are joining an existing Finet branch (which you would sort of have to do because the reduced payout would make it harder for you to stay in business alone) and that sure would make the Finet guy happier too. The question comes to how many ways can this pie be cut and still satisfy anyone?

In other words, if the Finet guy is making 85-90% and you come in with a 15% haircut and he wants to make a 10% too then you're down to 60% before expenses (ticket charges, E&O, VPN, Tech, Health insur, SSI, so on and cetera) so maybe you're netting 40% it's six of one ish. Now if they put a dollar figure that you need to pay to get your Indedendence from the branch (say 100,000) and after that they stop taking the 15%... well that might make it a good option. But you see what I mean about the pie slices.

OTOH, Wachovia could take the upfront money that they were going to pay you if you signed the deal and credit it to the branch you are leaving (if you go to Finet and then call that your working capital loan which you will pay off at a 3% reduction over time, if you leave you still owe it plus interest).

Independence has arrived and I'll pack up my office and work for the next few days out of my house on the coast. Technology is great! use it to be independent, no matter where you work!

Happy Fourth everyone!

Happy Independence Day to ALL!

My “Independence Day” was actually the Friday before Memorial Day weekend…about 2 years ago.  A happy day.

I’d like to chime in on the FiNet discussion.  This is my first post to the board but I’ve been reading it off and on for a while.  I’ve been with Finet for about 2.5 years and am quite happy.  I agree with much of what has already been said.  I looked in depth at Raymond James, LPL and FiNet.  FiNet seems to have a reputation of not being as fully independent as an LPL or Raymond James.  I would disagree with this perception.  There is a little bit of a wirehouse feel and culture (remember the majority of Wachovia FA’s are employees, not indy/FiNet)  However, I have good friends and LPL and Raymond James and can do everything they can.  The only thing I cannot do is charge hourly or a hard dollar fee for a financial plan.  This is because I have to work through FiNet’s RIA and they have not (yet) allowed these hard dollar fees.  I own my practice 100%.  I receive 90% payout on fee-based and packaged products and 85% on stock and bond transactions (I do very little of the latter).  I can completely customize my name and marketing materials and hire FA’s under me.  I REALLY like our fee-based platforms and believe they are the best on the street.  I use a “group name” which has my custom practice name and logo but also the Wachovia (in smaller letters) underneath.   This allows me to brand myself but also lets clients know that I’m affiliated with a major firm.  I could drop the Wachovia part of it if I wanted.  The other thing that has not been discussed is Wachovia’s Envision financial planning software.  It is very cutting edge and easy to use, and clients love it.  Compliance here is ok.  I think they may be a little more picky than and LPL or RayJay but I’m not complaining.  FiNet will also offer a little more in transition assistance ($$) than LPL or RayJay to help you get started.  I came from EDJ and produce around $500-600k.  I think FiNet is best if you do over $350k and are focused on fee-based/managed money.  Just my 2 cents.

Good post Glad2Bindy.

Couple of questions for you and whomitmayconcern:

1.  You mentioned FiNet is best for 350K producer and above.  I thought you had be at the $1,000,000+ level to qualify for FiNEt.  Is that requirement only for current WS employees?

2.  The fee-based platforms and managers you use…are those also available to regular WS employee brokers?

3. Is Envision something you can do right from your personal workstation or is it something that has to go through the WS homeoffice?

Thanks

Billybob,

1.  FiNet will take anyone that does over $250k if they are coming from another firm.  Current WS PCG/employee channel reps rarely are allowed to move to FiNet.  I've heard of a few situations where they basically have to threaten to quit or go to another indy, and then and only then will PCG allow them to move to FiNet... and they have to be a decent producer but I've never heard numbers.  I've also heard that they may start letting them go to FiNet at a reduced payout for the first couple years but this hasn't happened yet.

2.  FiNet uses all the same back office software, trading platform, and is offered all the same fee-based platforms and money managers as the PCG guys.  Any type of fee-based businees you want to do you can... they've got everything.  We pay admin fees that range from 30bps on sub-100k accounts to 10BP on 500k plus, and then we get 90% of that.  So if I charge 1.25% on a 250k account, there is about 15bp admin and then I net 90% of 1.10%.  We also have access to institutional share classes which keep expenses low for clients.

3.  Envision is something I do from my workstation and I control it.  Usually I show it to clients in my office and do not print them a plan.  But I could if I wanted.

You’re forgetting one thing. It’s owned by a bank, and they will f#$K you in the end.

[quote=Glad2Bindy]

Billybob,

1.  FiNet will take anyone that does over $250k if they are coming from another firm.  Current WS PCG/employee channel reps rarely are allowed to move to FiNet.  I've heard of a few situations where they basically have to threaten to quit or go to another indy, and then and only then will PCG allow them to move to FiNet... and they have to be a decent producer but I've never heard numbers.  I've also heard that they may start letting them go to FiNet at a reduced payout for the first couple years but this hasn't happened yet.

2[/quote]

Not quite right. PCG brokers have been able to go Finet for over a year, but at a reduced payout. This reduced amount goes to the PCG branch losing the broker for i believe 2 years to compensate for the branches loss of revenue. There is a second quasi independent channel called "profit formula" that requires a Minimum of 1 Million to sign up.

EZ said: "You're forgetting one thing. It's owned by a bank, and they will f#$K you in the end."

While this may be true (I personally disagree, but no-one knows for sure).  I don't see how it is any different than the threat of LPL going public or RJ being bought out...both of which I perceive as being very likely in the next few years.

FiNet is quite different than it was a few years ago.  It is the premier Indy platform.

...are you looking to go indy or are you a FINET recruiter?  You're laying it on a bit thick...

LOL!

No, I am not a recruiter....just someone who has done a significant amount of due diligence prior to this juncture - speaking for my practice alone, not anyone else.

...fair enough...couldn't help myself...

An observation...I think your payout is lower because of your active trading model and the fact that you intend to cover client ticket charges.  My payout is about 86%, but that's before technology charges...

Indyone -

I think you are correct about my payout, but it is a result of the admin fee that FiNet charges on the discretionary accounts, not the ticket charges. 

With LPL and RJ the ticket charges just ate me alive, but with FiNet they allow me to trade as often as I like while only paying an admin fee of 35bps max, down to 10bps on larger accounts.  I believe this is what results in my lower payout.

I may need to rethink my business philosophy/style if others are getting 85% or better payout before local expenses!  Damn!

I keep hearing about 82% before office expenses and met with a guy who is more active and pays the ticket charges on the wrap account and he came in about 79%, but was very active. 

The office expenses are the wild card depending on where you live and how much support/high end you go.

I'm in agreement with maverick/goose on the comment that "they are owned by a bank and will F you in the end".  Other Indy's have this risk too.  FiNet is actually a seperate legal entity with it's own management and supervisory staff.  Since we own our practices if the f*%k us they are going to wind up f*%king themselves because we'll just leave.  And they know this.  My only gripe is that because the FiNet is so small relative to PCG, sometimes the back office operations and compliance people and polices just lump us all together and don't realize we are under a different platform.  On the payout issue, most months I'm between 80% and 84% before local expenses.  I have 1.5 employees and a fairly low rent.  About half my practice is advisory fee based and the other half a mix of mutual funds, stocks, bonds and annuities.  So I wind up with around 55-60% Net. 

Thanks for the input Glad2Bindy. 

How long have you been with FiNet?

Did you come from a wirehouse?

Are you happy?

Maverick/goose,

Been with FiNet 2.5 years, happy for the most part.  CSG platforms are very cutting edge and I think our payout is fine.  Came from Ed Jones so by default I'm happier.  It sounds like you are FiNet also.  I really wish we could charge hard dollars/hourly for planning.  Especially with how powerful Envision is.  Do you have any gripes?

Glad2Bindy -

I am not with FiNet, but am considering it heavily.  I have done quite a bit of due diligence on the indy platforms and consider Finet to be top candidate - for my practice, can't speak for others.

I too, wish that Finet would allow hard dollar fees for planning.  I think that the clients believe that they get what they pay for in regard to the planning.  Plus, envision is very, very impressive.  I would make it a major part of my business if with Finet.

Forgive me...I am sure this is probably a very dumb question, but if your with Finet do you  get access to  Wachovia  research? 

How much do they charge for this  on the Indy side?

This is a very good topic and thanks to all for the contributions!

Pinn

Yes you get access to Wachovia research along with several others, there is no additional charge (or subtractable charge if you don't use it!)

[quote=maverick/goose]

Glad2Bindy -

I am not with FiNet, but am considering it heavily.  I have done quite a bit of due diligence on the indy platforms and consider Finet to be top candidate - for my practice, can't speak for others.

I too, wish that Finet would allow hard dollar fees for planning.  I think that the clients believe that they get what they pay for in regard to the planning.  Plus, envision is very, very impressive.  I would make it a major part of my business if with Finet.

[/quote]

Wow, I can't understand why FiNet would not allow an independent advisor to charge however they see fit. I've seen Envision and although it's not as advanced/robust as Naviplan & others it would still be enough for the typical client who doesn't have complex needs and that would certainly justify paying. This is one of the key problems I had w/ FiNet. If I'm truly independent then let me decide how I charge & what financial planning (or other) tools I use to do my job. Don't just pigeon whole me into the tool the BD THINKS should work. I would at the very least fight FiNet management to modify their ADV to allow for flat or hourly planning fees with Envision. That's the wave of the future you know!

There was a question earlier about moving from WS to Finet and what the
restrictions are.   I asked Jim Hays, (President of the Private
Client Group at WS) at the road show last week and he told me that we
would have a 15% haircut for the first year we were with Finet and that
we would have to return any retention money.  He said this would
be available as soon as the merger was complete and the computer
systems were merged.  He thought this would happen around the fall
of 2008.

Joe,

We're cool.

At last year's group meet it was mentioned that Finet is "looking into" the RIA platform. Now, I can't say that this was real exciting news to me personally, but there were other attendees who had apparently agitated for this action who were audibly elated.

If that means they are going to allow brokers to charge for advisory services or not, I don't know. I assume that's the sort of thing they were looking at.

Keep in mind that Finet's target market is the wirehouse broker doing over $400M in production (with $250 being the min num) and so they want to concentrate on the services that this broker wants. That "Quasi Indy, semi Corporate" attitude of theirs is intentional in that it makes for a much less dramatic leap for a guy who has come into the bus through a structured environment like the wirehouse.

For myself, as I've said before, it was exactly the idea that I felt I needed a little more discipline to my practice than the others were showing me that helped me make my decision (I like First Allied better, but they were a little little too West Coast laid back for my business persona, right on target for my personal persona, so I had to decide...)

Bottom line, with 600 FAs in the paddocks (probably this will swell with the addition of WS guys, including those with some AGE under their belts) it's not hard for the company to be nimble, if they feel there is a need, they'll address it, and it's not hard for them to get the message that there is a need.

This isn't to say things happen overnight, they seem to be of the mind that they'll get it right the first time, and it seems to me that they do.