[quote=planrcoach]

 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?[/quote]

It really varies depending on how active the account is. Usually 1%, prorated against an hourly fee of $200/hr. I'd say about half of clients don't do custody with us. I tell clients Planning/Analysis is one thing and custody/investment management something else, and so we keep/bill them separate.

I tell people we offer it as a service for people who don't want to fuss with stock brokers and/or want custom REIT/BDC portfolio's.

Since I rarely use mutual funds, (ex Vangaurd) trailer fee's arent a problem. Depending on the capital gains situation, I tend to liquidate high fee junk that comes in.

[quote]
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.[/quote]

Probably.

[quote]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.[/quote]

My own take is that target date retirement funds in 401(k) plans will make most of this industry obsolete, especially in the middle market.

TDAmeritrade is planning to introduce target date ETF's for example.

http://gewinnvortrag.blogspot.com/2007/01/td-ameritrade-gets -in-target-date.html

At the higher level's B/D's with acess to alternative investments and things retail RIA's don't will have a marketing advantage. Being an IAR and flogging SMA's doesn't add huge value in most cases IMHO.

The place where I see B/D's having an advantage is that they are the only people who can sell securities, so someone like bondguy who can mange a directly owned bond portfolio can be in very good shape

Although it's a debatable advantage, since I can buy $100,000 worth of LQD for say $15 or get a VG bond fund for a similar price. Vs a 1 point mark up/down.  By the time you factor the constant turnover of a bond ladder, it is often cheaper to own an index fund.

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

(oh my ***, pc is quoting pc)

The action item for broker dealer affiliates, in my opinion, is that we  need to pressure them to generally reduce costs, so we can afford to stay affiliated.

Not that they're not already getting that message from the market. It is called margin compression.

One way to deal with compression is to provide more value, at greater cost. Nothing wrong with that. I guess the big wirehouses are creating some products that draw on their strengths - which may provide more net value. The other way is to reduce costs.

If you are affiliated with a broker dealer and in the "middle", will you be forced to use a more efficient independent broker dealer.

Or will it really be worth switching to another broker dealer? Maybe you will just "go RIA" after doing the cost benefit analysis?

These issues have little to do with ethical behaviour, and bind us together as professionals - to the the extent that we influence the playing field, we can have better control over schlockey advisors who work on any platform (RIA included).

So don't train client to fear delivery platforms, and generalize mistrust against the profession. Train them to understand how it all works, and, as you mentioned Allreit, let them choose.

This is ethical behaviour, because any damage to the reputation of our profession (founded or unfounded) damages the quality of life and financial dignity of the roughly one third of Americans who will be retired in 2020. Since 80% of them will seek some kind of personal professional advice, this is a win -win, and in fact, there will be a shortage of qualified planners. Let's not foul our own nest.

My own take is that target date retirement funds in 401(k) plans will make most of this industry obsolete, especially in the middle market.

TDAmeritrade is planning to introduce target date ETF's for example.

There's a happy thought.

Since portfolio management is basically a commodity, another thought might be, you will still need broker dealer licensing to pull it all together, for the middle market.

They need help, and somebody needs to get paid.

Most people don't wake up and say, "gee, I guess I'll buy some insurance today to protect my family, etc.

The b/d industry will not lie down and die, it would like to serve higher nws, that's for sure.

You never addressed my concerns about the liability exposure of being RIA. Probably better to see what happens (to other RIAs in general) after the next sustained down market. Do you have some kind of fixed retainer arrangement with your attorney, or would she just bill by the hour? How safe are your personal assets - in my state, they would not be totally secure if somebody's risk tolerance turned about to be misjudged. Documentation is nice, being on the hook is a drag.