Registered Rep. spoke with Francais about competition in the wealth-management business. His firm, Quintile, recently agreed to merge with Kochis Fitz, creating the third-largest RIA in the U.S.
Registered Rep.: Considering the talent squeeze in the wealth-management industry, where does Kochis/Quintile expect to find new recruits?
Rob Francis: One of the competitive advantages of Kochis/Quintile is that equity participation is part of the culture. There is plenty of talent out there looking for the right home — a safe place to serve clients — where they can participate in economic benefits in a way that's consistent with serving their clients. We think our merger presents an alternative opportunity for individual advisors, and also firms who share the same values.
RR: Will the death of “The Merrill Rule” result in more direct competition from wirehouse advisors?
RF: I think the larger the client, the less competitive the wirehouses are, because the objectivity of the independents becomes much more important.
RR: What if wirehouses develop a more RIA-like model, where advisors have a fiduciary-like relationship with clients?
RF: They've been marketing this way for 10 years. Are they becoming more and more fiduciaries? Directionally, yes. And nobody should underestimate the competition. But it would take a very large cultural shift for them to successfully compete with the independents as fiduciaries. Merrill, for example, would have to get out of the corporate-finance business and stop selling product, which they would never do: It's 90 percent of their bottom line. Merrill also has passive shareholders that expect a certain return, who are not part of the client process. An independent can offer best pricing to an ultra-affluent family because we don't have passive shareholders built into our cost structure.
RR: Would you someday consider an IPO?
RF: We would not. Our shareholders are the generation two and three of advisors in our firm, which aligns us with what clients want.
RR: What about the increasingly global nature of wealth management? Are you at a disadvantage not having offices overseas?
RF: There's plenty for us to do in the U.S. We participate in conferences abroad; we have clients and contacts abroad. But it's not part of our immediate plan to move into that space. I don't see a disadvantage in terms of investments we offer to our clients. We have access to anything that a big wirehouse or a large global enterprise would.