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Oct 13, 2006 9:39 am

I'm considering making a change and taking a look at what I consider 'true independent models', not LPL or RJ. I feel that LPL has gotten as big as a wirehouse and will go public soon. RJ is public and have heard a lot of complaints from their reps about increasing fees and the restraints of variable products.

I have a diverse business model 25% fee based, 25% va's, 20% fixed income, 20% equities, 10% misc. I've been taking a look at the following firms Commonwealth, Brookstreet, Next, GunnAllen and Cambridge. Any opinions???

Oct 13, 2006 9:43 am

OK help me out here…LPL and RayJay are not ‘truly independent’ models, yet you’re seriously considering GunnAllen as an alternative?  You might want to use Google or some other source and do some research on GunnAllen’s background.

The size of the firm, and whether or not they are publicly traded has little or nothing to do with whether or not they follow a ‘truly independent’ model.  In fact, one could argue that in the indy world, and especially in this regulatory environment, size really matters.  It creates the economies of scale that allow a firm to make significant investments in technology infrastructure.

Oct 13, 2006 10:47 am

I'm with Joe.  Size may sometimes have an effect on service quality, particularly when a firm is growing rapidly, but size and the possibility of going public does not mean that a firm doesn't have an independent model.  You're confusing the independence of the firm with the independence of the advisors it serves.

...and GunnAllen?!!  Please tell me that you're kidding.  Of the firms you mentioned considering, I've heard positives only on Commonwealth.  As for the others, you could certainly do worse than RJ and LPL.

Oct 13, 2006 12:01 pm

What does independent mean to you? What do you need? Nobody is ever truly independent as long as the answer to more than the client, ie. NASD, SEC, NYSE, etc. Yes, even the RIA's have accountability to the SEC and state.

So, you need to figure out what you consider indy. If it's controlling  your local environment, having tax advantages, building a sellable asset, making more cash flow (or at least a much better bottom line in terms of fully allocated profitability), then many of the firms should be considered- and you want one that will also be around for quite some time which many of the chop shops or smaller ones will not be.

Addtionally, you want a partner who will have the leverage and asset backing to offer competitive products, services, and technology.

Independence is not just about affiliating with the b/d who lets you get away with the most stuff-

Oct 13, 2006 12:42 pm

I think you're looking too deeply into it, hardcorp.  Your points are all valid, but...

Independent Advisors are 1099'd.  Employees are W-2'd.  Everything else follows from that.

Oct 13, 2006 1:27 pm

That’s all interesting but ponder this…Are we ever really free?

Oct 13, 2006 1:51 pm

[quote=uwec86]That’s all interesting but ponder this…Are we ever really free?[/quote]

And if a tree falls in the forest but there’s nobody around to hear it, does it really make a sound?

Oct 13, 2006 1:59 pm


Oct 13, 2006 2:21 pm

Freedomlvr- take no offense but if it was as simple as just getting a 1099 and getting a W-2- we'd all be at one firm, theoretically. My point is that you first must decide what it is you are trying to accomplish in order to find your "best" fit.

For instance- if you are not branding yourself because you think you need a nationally recognized brand you may choose a Wachovia FINET or a RJ, whereas if you are looking to hand your license but then setup an RIA as well, you may choose a LPL, or you may not.

The clearing firms are the ones who have much of the research, technology, products, services, etc-the b/d is an entitiy that creates policy on its interpretation of laws- which is why some interpret loosely and some are very strict. So, you have to look at it and ask yourself what you NEED from a b/d and then from there, figure out who to conduct your due diligence with. You might need big upfront money, so you look at one firm, or you might need the flexibility to do lending, so you look at another, etc.

This is not looking to hard into it- it's doing yourself justice to understand where you are going (ie a business plan) and then finding the right partner to do it with. I could write a book on the hundreds of conversations I've had with advisors on just this and all the things they look at when trying to find a home- and I certainly don't affiliate with all of them and I offer a 1099- but it might just not have been a good fit- for them, or for us. That's my point.

Oct 13, 2006 4:12 pm

RD, no offense taken, we're talking about 2 different things here.  You're talking about the quality and services of the firm.  I'm just talking about the difference between independent and non-indy.

Once you decide if you want to be an employee (W-2) or a business owner (1099) you have to decide which indy b/d fits you (and some are more indy than others).  Or even if you want to affiliate with a b/d vs being your own RIA.

Otherwise I agree with pretty much everything you said.

Oct 13, 2006 5:38 pm

I see it like this…

Non-independent: Merrill, Wachovia, Smith Barney

Semi-independent: Raymond James and Assoc., LPL, Commonwealth, etc.

Truly Independent: Your own RIA. You can work through ANY custodian

you want.

If you want to be truly independent, set up your own RIA. That’s the true

pinnacle of independence, and it all works down the food-chain from


The firms you listed are in the quasi-independent area. While it’s a good

start, it’s a baby step in the proper direction. I don’t view any firm, unless

you set it up on your own, as a truly independent firm.


Oct 13, 2006 5:46 pm

I would caution you from the advice given above by Captain. Though he has found that RIA is right for him, it's not right for everyone. Saying other platforms that use a b/d are not independent is somewhat ignorant-

to begin with- uncle sam sees you as independent- through you LLC, S-Corp, C-Corp, LP, etc.

secondly- you don't work for anyone, you hire them, BUT you work within their tolerance for risk (ie: policies), which you don't do in the RIA world because they are your policies because  YOU are the one accountable to the SEC and the state (albeit if you run a clean business and make no mistakes, not a problem)-

Anyway- I strongly disagree with Captain that the only true indy is RIA- that is an incorrect statement typically made by an RIA. Sorry to disagree but that's my professional opinion.

Oct 13, 2006 8:38 pm

Why be sorry for your opinion?

Are RIA’s on the same level of independence? I don’t think so.

Yes, we are accountable to the SEC directly. I don’t see the downside,

unless you prefer to run afoul of the simple rules which exist. Either way

on a regulatory basis, you are accountable to someone, in our case, it’s

the SEC and that’s it.

If you affiliate with LPL, Commonwealth, Raymond James, etc., you are

dependent on the use of their systems and trading platforms. Quite

simple, really. I don’t see that as ‘independence’ to choose what ever

platform you prefer. Independence means that I can manage assets at

Merrill Lynch, LPL, Schwab, or Fidelity… where the client has the assets,

we can do the job. That’s true independence.

The definition of ‘independence’ is this… ‘executed or originating outside

a given unit, agency, business’. I don’t get how someone is independent

by affiliating with LPL. What… are they buying a different set of mutual

funds offered by LPL, that isn’t available through Merrill? They have a

limited ability to buy and sell, they are RR’s for a firm, they join a firm’s

RIA, and still have to play by their rules and MUST use their systems,

regardless of their preference…

I think that most people say ‘we are independent’ because their payout is

larger than that of a wirehouse. They are doing the same thing, just

paying for things, THROUGH A FIRM they joined.

I frequently laugh at myself for even offering these comments, since I

have no vested interest in what I prepare, think, and post on this forum.

But, if more people understood what the formation of an RIA actually

means, and how exactly it works, it would impress many more people

than you think.

For years, the brainwashing of 'you don’t want to incur that much risk’

was certainly out there… but, think of the people who have done it, talk

to them, and weigh the facts? You’d be surprised at the result.

It took me a long time to come to the RIA conclusion, but the rest of the

companies just looked like same old $hit, different name to me.

RIA’s are truly independent. If you don’t want to assume the

responsibility, that’s fine. However, an RIA is as high as you can get in

the chain of independence, and the rest just happens to be different

levels of compromise.

Over and out.


Oct 13, 2006 9:18 pm

Over and out? Okay- so the "Captain" is rank? Former military? Strong headed?

I think most of us don't really have a VESTED interest in what we write on this forum- it's just fun to debate, offer advice, and see what others think- which makes us grow. So, don't laugh at what you write just because it you're thinking "WIIFM"- Captain.

Yes, RIA is the truest form of independence- you are paid for your expertise and advice and can use any custodian and platform BUT I just did not want that to come across as the ONLY true independent because that is misleading (whether you agree or not).

I have read many of your points this last couple of days and thought most are very good and I respect your passion for the RIA but I think the LPL's, RJ's, and Wachovia FiNet platforms very much represent independence, but in a different cost structuring and with custodian requirements. I'd be glad to debate this with you- I am intimately familiar with the model, and I too, was a Captain, Captain. HOOAH!

Oct 13, 2006 9:50 pm

You are a good guy, my friend.

I’m not a military guy… but, I do own and race my sailboat frequently. So,

the term captain comes from that. It’s just what friends have resorted to

calling me… nothing more.

Thanks for the debate.

Life is good.


Oct 13, 2006 10:23 pm

Of course if everyone was an RIA about 50% of current brokerage clients would be forced into self-service or remote internet/teleservice systems. If commissions ended who would RIAs condescend to next?

The scaling isn't that flexible and it would be a much smaller industry by head count if everyone thought RIA was the only solution.

The real improvement would be if there was direct regulation option for commission trade that qualified brokers could choose the platform they place by account and have client custody with proper disclosure. This would equalize the RIA advantage for independent commission advisors and free us of the "rep" trap that is always called upon. Scratch about 100000 dead-weight salaried home office buffoons making trouble in the dealer complex as well. Public abuse would decline as well as an independent malpractice system would work better than the NASD which should be eliminated. 

Oct 14, 2006 6:01 pm

Thanks for everyone's input...

For the individuals who think that RJ and LPL are the best do you have any reasoning behind your feelings? Experiences?

Same for the responses on GunnAllen. Did you have a negative incident? Former employee?

Oct 14, 2006 6:43 pm

I have a strong opinion that if you are looking at LPL and RJ, both find firms for certain advisors, then you should throw Wachovia FINET into the mix.

That is purely my professional opinion and yes, I have a biased because I affiliated with them 3 1/2 years ago and work with them now. I'm only saying- "take a look"-

Oct 16, 2006 2:12 pm

If you want to be an independent broker, contact a few firms that do nothing but clear for broker dealers.  My guess is they have a few firms on their rosters that might be interested in working with you as a complete independent.

I for one have my own broker/dealer so yes I’m independent.  I know there are a lot of firms like me (not me though) who are looking to team up with brokers for a small percentage of their business.  Be realistic that they will require a certain amount of revenue and you will not receive much in return compared to what you are used to probably.

Oct 17, 2006 6:00 am

Beagle- who does your clearning? How much time are you or your staff spending on compliance issues?