[quote=AllREIT] [quote=mikebutler222]

Clearly you're being a salesman, and the worst sort. The sort that claims you have a monopoly on integrity....

[/quote]

No monopoly, just more than merrill lynch.
[/quote]

That statement alone, the unspoken assertion that ML ONLY offers RR services, proves you're on the short end of the ethical behavior stick.

Such as? And be careful about stones and glass houses. Any sales activity with customers who know less than you do has ethical implications.

However, some business models have more ethical wiggle room and possibilities for misrepresentation than others.

That about sums it up. 

If we did dual, I would want the prize to be determination of where the CFP mark gets to reside. Anyway, dualing would be kind of like the man who tried to catch his shadow. I prefer to let Joe Conrad's comment stand. I think you and I know all the reasons and implications. We could replay the thirty third martial arts scene in the movie China Dragon. We know all the moves.

I believe we both reside in the glass house. Market activity is beautiful. Being RIA gives you some great selling stories, and you get a much higher % of what the client pays.

Nothing wrong with letting the client decide.

I'm just saying, if you know anyone who is trying to make a moral virtue out of it, let them know that what goes around comes around.

The way things stand right now, I guess I see the structure of the industry as being like: suppose we both support the need to fight a war against economic ingorance. The stakes are the continued economic viability of our country (for real).

I'm out fighting on the front lines (higher costs),  ,but you are too smart to fight on the front lines.

Pretend that broker dealer, who funds the war against America's negative savings rate, does a lot of bad things and needs to change. He manufactures products and sells other manufacturers products, sometimes he is greedy.

He also does a lot of good things. Trains the next generation of planners. Spends money to go out and actually find people and drag them in and makes them save money. Persuades them to buy life insurance and personal disability insurance.

Spends money to create products. Makes long term commitments. Educates people.

Not you, some other RIA comes along and says, hey, you have a nice account. Come over here, I'll do it cheaper.

(Not cheaper than my wrap accounts at 1%, with ETFs.)

And even if you rip an account on price, it may be disingenous to cherry pick costs that are being amortized over time. At the very least, this is not moral superiority.

Some other RIA does a lot of bad things. He failed at a broker dealer, and registered with his home state and set up shop. He makes mistakes, and the first big market correction gets sued, bringing attention to his business and all the other little RIAs in the neighborhood.

Anyway, I think we just about all have the same products, it comes down to the ethics of the individual rep.

With regards to the CFP designation and Merrill Lynch rule, the prize du jour, the burden of proof is the aggressors.

If you're going to apply for sainthood the only route is hourly rates on financial planning fees.

That doesn't even work.  Look at lawyers who pad their billable hours.  The bottom line is that mode of compensation does not make one more or less ethical.  Ethical people do ethical things regardless of mode of compensation.

[quote=AllREIT] [quote=BondGuy]

[quote=AllREIT] [quote=joedabrkr] [quote=AllREIT]
The "merrill lynch rule" is the RIA's sardine key.
[/quote]

Nice analogy.

I am a mere IAR, not my own "RIA".  Yet, for clients who get the distinction, they have been most happy to convert to a fiduciary "platform".
[/quote]

It is really powerful. See

http://www.tdainstitutional.com/advisoreducation/index.htm

For some idea's on using your sardine key to best effect.

Most people just don't know about how traditional B/D's and RR works. A simple "Is your trusted advisor really a salesman in disguise?" theme works wonders. The traditional A-share model doesn't stand up to scrutiny.

You keep bringing up the A-share thing. Yet you call yourself AllREIT. Something doesn't add up here? So, is that AllREIT Allthetime?
[/quote]

Bondguy You are grasping at straws.

I'm AllREIT because back when I starting out, I ate very little but sardine's so as to save money for my REIT portfolio, the income from that portfolio ment I could build my book the right way. If I had to do it over again, I would have spent more on breath mints.

Showing your personal brokerage statement, really builds trust. "I  own it myself."

[quote]You ask probing questions about if the prospect has ever felt that their broker sold them something. If they say yes, you break out the sardine key and start turning.

And you ask probing questions why? To figure out which REIT best suits their needs? Or yours?

Sorry Bud, but for someone on the high horse against a segment of our profession your screen name doesn't say much for you.[/quote]

As an RIA, how could any investment "suit my needs"? I don't get paid to sell investments.

All I have to do to to wedge a client from a B/D is find out if they have the littlest crumb of discontent, and then you start working on that.

Revealing to people how the B/D system works and merrill lynch rule can get clients to positivly hate their stockbroker. They feel lied to and deceived.

After all, if you are a financial advisor why don't you offer advisory accounts?
[/quote]

You are so far out there it's funny. Are you really Sam Waterston? I really liked you in Capricorn One. That one's kinda iffy now though since your costar was OJ. Gotta tell ya, the Law and Order thing-gettin kinda old.

Ethical people do ethical things regardless of mode of compensation.

The growth of RIA is a competitive economic activity.

The move to revoke the CFP from registered representives is an economic activity by a self-interested group.  

We keep score by seeing what develops in the CFP licensing debate.

[quote=planrcoach]

Ethical people do ethical things regardless of mode of compensation.

The growth of RIA is a competitive economic activity.

The move to revoke the CFP from registered representives is an economic activity by a self-interested group.  

We keep score by seeing what develops in the CFP licensing debate.

[/quote]

Pcoach, you've hit it squarely on the head. Well said.

Pcoach, you've hit it squarely on the head. Well said.

In the spirit of recognizing the breadth and depth of broker dealer affiliation, we're lucky to have your experience and insights.

[quote=planrcoach]

Ethical people do ethical things regardless of mode of compensation.

The growth of RIA is a competitive economic activity.

The move to revoke the CFP from registered representives is an economic activity by a self-interested group.  

We keep score by seeing what develops in the CFP licensing debate.

AllREIT, I have to say, this entire thread is the biggest crock of @#$% I

have ever seen. I have said this in so many threads, but it does NOT

matter what your mode of compensation. Anyone can have a conflict of

interest. B/D channels have just as much opportunity to be ethical or

unethical as RIA’s. The fact, which you previously stated, that you

basically bash other channels to your clients is proof that you have a

conflict of interest. You are trying to win the business. And that is fine.

But you can’t then claim that you are completely independant. You are

selling a service, bottom line. You’re a salesman. Anyone in business

(any business) is. That in itself is a conflict of interest. Not unethical.

Now, I am certain that there are some RIA’s (oh, nobody WE know) that

push the envelope as far as what they tell clients in order to gain

business. But again, that is because THEY are unethical, not their entire

channel.



I have nothing against RIA’s at all. I think it’s a great business model. It

just competes against B/D’s. That’s fine. It’s like Red Sox-Yankees. You

can argue about it all day long. You just can’t write off an entire industry

as unethical simply because it exists. I can tell you, I explain to every

client exactly how we work. I don’t always explain the advisory-fee

model, because frankly, not many exist near me that compete (we have

many B/D offices in my area which are the majority of the competition).

But I explain all the different ways we can get paid, the pros and cons,

etc. And if someone wants a C-share, they get it, if they want a B-share,

they get it (rarely). I explain how I get paid on bonds, stocks, CD’s, etc.

People appreciate the honesty. And nobody can really poke holes in it,

since we had the conversation up front. I have actually had several clients

come over that were tired of paying an advisory fee every year for what

they describe as an “absence” of service. Can’t get call backs, nothing has

ever been done with their accounts (not even when their portfolio was

getting pummeled during '00-'02 ), etc.



I think we all have the opportunity to be ethical, regardless of channel.

But too many years of sensational headlines and slick “wall street” movies

have soured people on the industry.

The growth of RIA's has everything to do with the fact that its more profitable for the RIA and yet cheaper for the client. If you are already  independant or a franchisee, you should really think about making the jump. Contact Fidelity or Ameritrade RIA services and they would be happy to help you with the process.

It's alot more fun being on the same side of the table as the client, and you get a nifty gold plated sardine key too.

I did check into Fidelity RIA. I run a very clean book, it would be easy. My income would not decrease.

A few concerns: mainly, liability. Some client sues me in the next down market. Given my track record, this is unlikely. But we do deal with the general public. I feel the broker dealer provides an extra layer, albeit at a big price.

Also: confusing for clients, no branding, disruption of golfing time.

Having chosen to embrace the platform, I agree entirely with these comments of 24. I hear what you are saying, RIA is more fun and profitable. I'm sure we could all have a few laughs over a good game of golf.

Competitive forces: to make a change is to embrace something new and give up something old. I thrive on change. But I like to think that the broker dealer industry will fight back, by reducing costs and in other ways. For example, the truely affluent to associate and benefit from the broker dealer platform. Ironically, I think the mass affluent do too, because of the extra layers of regulation and ultimately liability protection for me, in the sense that I stay in business.

I guess I am getting conservative in my old age.

Also, frankly, I am fascinated with this ethics question. We all know the numbers, the trends, the potential results and so on. To the extent that broker dealers can evolve a bit, the current disparities between the platforms will diminish. Since this a market function, I am confident that will happen.

I think you are very generous with your honest viewpoint and you obviously helped drive a very fruitful discussion here.

[quote=AllREIT]
It's alot more fun being on the same side of the table as the client, and you get a nifty gold plated sardine key too.
[/quote]

I hate to burst your bubble, but you're not on the same side of the table, you have to defend YOUR performance or the client walks. I'm on the same side of the table as the client as we (the client and I) can conduct a conflict-free review your performance against hundreds of other RIAs and hire or fire you based solely on objective criteria. Doesn't affect my fee one tiny bit.

Close, but no cigar…..

[quote=Broker24]AllREIT, I have to say, this entire thread is the
biggest crock of @#$% I have ever seen. I have said this in so many
threads, but it does NOT matter what your mode of compensation. Anyone
can have a conflict of interest. B/D channels have just as much
opportunity to be ethical or unethical as RIA’s. The fact, which you
previously stated, that you
basically bash other channels to your clients is proof that you have a

conflict of interest.[/quote]



With whom? I sure have a conflict with the incumbent providers.



It is my sincere belief that sales comissions and unbiased financial
advice do not mix in the long run. It’s kind of like italian dressing,
with some effort (physical shaking + emulsifiers) they can be mixed,
but over time they will separate.



[/quote]You are trying to win the business. And that is fine.

But you can’t then claim that you are completely independant. You are

selling a service, bottom line. [/quote]



I am self-employed,  so I’m pretty damn independant.

[QUOTE]People appreciate the honesty. And nobody can really poke holes in it,
since we had the conversation up front. I have actually had several clients
come over that were tired of paying an advisory fee every year for what
they describe as an “absence” of service. Can’t get call backs, nothing has
ever been done with their accounts (not even when their portfolio was
getting pummeled during '00-'02 ), etc.



I think we all have the opportunity to be ethical, regardless of channel.
But too many years of sensational headlines and slick “wall street” movies
have soured people on the industry.[/quote]



I’ll say this much, I have met many ethical B/Ds. But I have also seen
way too many abusive practices and I think they are encouraged or made
easier inside of the B/D model. I have no preferred funds, except for
SDY.



Inside an RIA platform the choice of investments is not clouded by issues of compensation.
Clients in my experience appreciate that, and it is a very powerful
point you can use to peel away clients from existing B/D relationships.

ALLREIT, So are you saying that if you became a registered rep, you would all of a sudden become less ethical?

I work both sides of the aisle.  I prefer the RIA side.  Why?  I make more money.  For an ethical non-churning advisor, the RIA side pays much more.  Therein lies the ethical dilemma.  I have many clients from early in my career who have American Fund "A" shares.  Over the last 10 years, they have been the top performing fund family (Barrons Feb 2007).  My clients have total annual expenses depending on mix of about .75%.  It's been great for them, but terrible for me.  A broker can't afford to service accounts for their share of .25%.

[quote=anonymous]

ALLREIT, So are you saying that if you became a registered rep, you would all of a sudden become less ethical?

I work both sides of the aisle.  I prefer the RIA side.  Why?  I make more money.  For an ethical non-churning advisor, the RIA side pays much more.  Therein lies the ethical dilemma.  I have many clients from early in my career who have American Fund "A" shares.  Over the last 10 years, they have been the top performing fund family (Barrons Feb 2007).  My clients have total annual expenses depending on mix of about .75%.  It's been great for them, but terrible for me.  A broker can't afford to service accounts for their share of .25%.

[quote=joedabrkr]

Look not only at past performance but recent
asset growth and style drift.  I think you’ll find it pretty easy
on your conscience after that to start moving assets.

On Wall Street, when the mighty forget their vulnerabilities, that usually is followed by a nice stumble.

Just my 2 cents…
[/quote]



New clients can’t eat past performance, so you need to look at GFoA right now, vs talking about what it has done in the past.



GFoA is managed by two subadvisor’s but Vanguard has used up to six in
their big active funds. A $7 billion fund is going to be a closet index
fund or else an active megacap fund.

Joe, I should not have mentioned American Funds in my post because I'm not coming out either pro or con American Funds.   My point was suposed to be that a buy and hold investor will be paying significantly less by being with a RR and buying an "A" share than they would pay in an advisory account. 

As advisors, we will always have conflicts.  Ethical advisors will do the right thing for their clients.  Unethical advisors won't.  I'm also not saying that cheapes is the best. 

[quote=anonymous]

ALLREIT, So are you saying that if you became a registered rep, you would all of a sudden become less ethical?

I work both sides of the aisle.  I prefer the RIA side.  Why?  I make more money.  For an ethical non-churning advisor, the RIA side pays much more.  Therein lies the ethical dilemma. 

It’s too much tension between having to eat and acting in the best interests of clients. Sell the annuity or go hungry.



As for GFoA, although M* dosn’t let you do it, I’ll bet a jelly donut
that S&P 600 Value index has smoked GFoA over the past ten years.



Again, as you said, the RIA model is more profitable for you, and yet
cheaper for clients. Win - Win all around. And you get a sardine key
too.

[quote=AllREIT]


New clients can’t eat past performance, so you need to look at GFoA right now, vs talking about what it has done in the past.



GFoA is managed by two subadvisor’s but Vanguard has used up to six in
their big active funds. A $7 billion fund is going to be a closet index
fund or else an active megacap fund.







[/quote]

That would be exactly my point!  Too many people are gleefully pouring assets into the family without considering the implications.

Actually I think their management committee(not subadvisors’s) has more than 2 PM’s.

[quote=AllREIT] [quote=anonymous]

ALLREIT, So are you saying that if you became a registered rep, you would all of a sudden become less ethical?

I work both sides of the aisle.  I prefer the RIA side.  Why?  I make more money.  For an ethical non-churning advisor, the RIA side pays much more.  Therein lies the ethical dilemma. 

[/quote]

If was an RR my sucess would be sales driven so there would be a constant strugle between sales comissions and the right choice. The more you work the churn, the more butter you make. It would warp anyones work ethics.

It's too much tension between having to eat and acting in the best interests of clients. Sell the annuity or go hungry.

[/quote]

This is so uninformed it's scary. Maybe sales commissions would lure you to do the wrong thing. Realizing that you've made the right choice for yourself. You've been drinking too much of the no load cool aid on the commission versus client best interest issue, and are so far from center to be near the lunatic fringe.  You are entitled to your opinion, but that's all it is, an opinion. Reality is on an entirely different plane.

The worst financial damage I've ever seen done to anyone was done by an RIA. And I have yet to meet an RIA who delivers value for their fee. Their performance is index minus fee. Which,generally speaking is no better than any other group. So when it comes to RIAs, I guess you do get what you pay for. Yet, I don't go around telling clients or prospects half baked truths about RIAs. The truth is it's not about the fees or the commissions, RIA,CFP, Wirehouse, or Insurance company, it's about the relationship. It's about caring and it's about trust. Sure the fees matter, but only as a secondary consideration. If you want the best and get the best, fees aren't an issue.  Performance also is not a top consideration. Important, but not first on the list. Industry veterans understand this order of business which is why it is so counterintuative to believe that any "broker" would abuse a client.

Where we differ is in how we approach the marketplace. You compete solely on price. You come at prospects flying an Etrade like banner that reads they are ripping you off! Your pitch, like Etrade's, isn't centered on your successes, but on the competition's failures. You are centered on price. And certainly, there is a market for that type of client. I compete on level of service and quality of advice. I have a long, very long, track record, I can point to, as well as a book full of very happy clients. I'm client centered, not price centered. The relationship is key. My pitch is wrapped around my service model and dedication to the client's goals. We talk about family. If I talk about the competition, it's never negative. In fact I respect the competition. They're pretty frickin good! I am totally focused on what I can do for the client, not what someone else has failed to do. I must be doing something right because I lose very few clients to the competition, and I've never lost one to an RIA. or for that matter a CFP.

So, while you believe you need to compete by screaming at the top of your lungs that we are crooks, we on the other hand feel no such need to return the favor. There is no reason to. If we can't compete on who we are and what we bring to the table, then we don't deserve the cleint's business. It's that simple.

 It would be nice if you'd tone down the retoric though, it really is annoying. And in pointing to shortcomings of the industry, you bring us all down.

 I'm client centered, not price centered. The relationship is key. My pitch is wrapped around my service model and dedication to the client's goals. We talk about family. If I talk about the competition, it's never negative. In fact I respect the competition. They're pretty frickin good!

Major points.

Also, for me, at the broker dealer platform, there is no pressure to sell anything, since my income is fee based (mainly wrap). B/D provides flexibility to service other junk that comes in, often at lower cost (as was pointed out, client pays 25 bp on buy and hold A shares - a problem for RIA since the custodian keeps the trails - you would actually have to increase the cost to client to get paid at RIA, a definite conflict).

Allreit, what % of AUM do you charge?

I'll bet my clients get as good or better deal than yours (ETFs at wrap).

The real issue is, you get paid more, my broker dealer keeps a lot more, that does not hurt my clients.

I think you might be overstating the virtues a little.

Like Bond says, we are back to bigger picture stuff like goals, relationships, good financial management advice.

I do think it is unfortunate that some RIAs are attacking b/d affilates on the conflict of interest question - that is largely disingenuous, for a lot of reasons.

One of the biggest may be, b/ds do a lot of training in this industry, bringing in the next generation of planners. I guess you don't get any ethical points for spending money on that activity.