I can’t speak for others on this, but at our firm it was a total non-event.

Any idea how much assets were in these accounts at your firm? Every attorney and a few former branch managers that spoke on this topic said it would be an administrative and communications nightmare. I’d like to know how the transition was handled.

Any idea how much assets were in these accounts at your firm? Every attorney and a few former branch managers that spoke on this topic said it would be an administrative and communications nightmare. I’d like to know how the transition was handled.

It was something of a minor PITA. It was one more admin thing to do that had there not been the change, I wouldn't have had to take time from real business to take care of. It had to be explained to clients, the difference between an advisory and brokerage accounts, again. They’d heard it before, but frankly they didn’t care, and we had to review it. <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Any time you have to reopen an existing relationship, for whatever reason, it can be tricky, but I moved the vast majority of assets from flat fee to advisory accounts without a hiccup. Some assets went o traditional brokerage accounts because they were unsuitable for advisory for one reason or another, but on the whole just a paper drill.

It was something of a minor PITA. It was one more admin thing to do that had there not been the change, I wouldn't have had to take time from real business to take care of. It had to be explained to clients, the difference between an advisory and brokerage accounts, again. They’d heard it before, but frankly they didn’t care, and we had to review it. <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Any time you have to reopen an existing relationship, for whatever reason, it can be tricky, but I moved the vast majority of assets from flat fee to advisory accounts without a hiccup. Some assets went o traditional brokerage accounts because they were unsuitable for advisory for one reason or another, but on the whole just a paper drill.

I had many fee in lieu of commission accounts and had to get new paperwork signed. The fee structure on the advisory account was slightly higher, but I offered a discount to bring the fee back in line with what the clients paid previously. I just called all the clients and explained the lawsuit and how it was resolved and how it impacted each client. Then I offered a few choices. All but one went to the advisory account.

Ditto mikebutler’s comments…clients in that arrangement were typically de facto advisory relationships.

[quote=Philo Kvetch]I can’t speak for others on this, but at our firm it was a total non-event.[/quote]

It was a non event because all of our fee-based accounts are advisory accounts, and you must be registered as an IAR to use them.

My experience mirrored that of the wirehouse I’m with. 85% moved into a fee-based advisory account of some type, and 15% went back to a traditional commisionable brokerage account.

I would concur with the others - it seemed to be pretty much a non-event at my firm as well.  Strangely anticlimactic after all the prognostications of the sky falling.  It reminded me a little of the Y2K scare.

As someone who had a number of fee-in-lieu accounts it was certainly something I could have lived without, as it forced me to spend a lot of time going over regulatory issues with clients instead of doing other work for them.  Client reactions were generally a mixture of bewilderment and annoyance in trying to decipher what it was all about. 

You have to be really motivated to take the time to fully grasp the implications of this change, and in practice few clients show such motivation.  Maybe they’re too busy trying to figure out what to do with the reams of disclosures they already receive to little benefit.  Especially in the world of lawyers and regulators, quantity is not the same as quality, and more is not always better, though they seem to take little notice of this. 

But I digress.  I suspect at the end of the day, this simply served to accomplish two things.  First, it increased liability exposure for b/d’ers as assets moved from fee-in-lieu brokerage accounts with suitability standards into their subsidiary’s RIA advisory accounts with fiduciary standards.  Probably the only thing that would scare the b/d’ers more than accepting fiduciary responsibility/liability via their RIA is the fear of accepting it through each individual rep.

Second, it decreased investment choices and increased investor expenses at least slightly, as most advisory programs carry higher fees that fee-in-lieu accounts.  Some reps may have discounted fees to buffer this a little, but I doubt you would find many cases where the cost to investors actually decreased.  Some investors who chose to revert to traditional brokerage accounts now face the double whammy of paying a commission to sell securities for which they already paid a fee to hold. 

I’m afraid this was yet another example of the old adage, ‘when all is said and done, more is usually said than done.’  

Remember Y2K?