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Jeff Spears CEO of Sanctuary Wealth Services LLC San Francisco
<p> Jeff Spears, CEO of Sanctuary Wealth Services LLC, San Francisco</p>

Cold Call with Jeff Spears

REP.: Your firm offers “business support” for RIAs, specifically breakaway brokers. You consult for eight firms with $2.1 billion in assets. You say that a large cohort of the best brokers has not yet left their wirehouse firms. Why?

Jeff Spears: Most of the best, top producing brokers still owe their firms too much from their recruiting or retention loans for it to make financial sense to leave.

REP.: Why do wirehouse advisors leave anyway?

JS: Each broker leaves for a different reason that is unique to their business or personal situation. The reasons range from a corporate merger, compensation change, loss of a large client to a life event, such as a divorce or children moving out of the house.

REP.: How long does it take to make money after all the moving costs?

JS: Transition of an advisor’s entire business usually takes three to six months.

REP.: What kind of operating margins do RIAs gross and net?

JS: Large RIAs should earn operating margins of 60 to 65 percent. Net: Between 10 and 30 percent.

REP.: How do breakaway teams work out compensation?

JS: It’s similar to when they worked on Wall Street. The only difference is that your branch manager is not involved in the decision.

REP.: What portion of a book can a broker really expect to take with them?

JS: Our experience has been from as low as 70 percent to as high as 100 percent.

REP.: Does the b/d try to hassle departing brokers? Is the protocol still respected? Any playing around with U5s?

JS: The protocol is respected but most of the hassles are related to outstanding loan balances and perceived client solicitation violations.

REP.: What is a departing broker giving up? What is he gaining?

JS: Giving up syndicate [IPOs] but gaining greater access to investment products from any provider, including an FA’s old firm!

REP.: Who shouldn’t leave the bosom of a wirehouse?

JS: A broker who has a large trading business, typically with middle market institutional clients or a broker that has a lot of syndicate business.

REP.: What do Wall Street firms do right?

JS: Wall Street does a good job of taking care of their largest producers through client events, A+ office space and special trips for top producers.

REP.: Which is more profitable: hybrid, fee-only or RIA as portfolio manager?

JS: The hybrid makes the most current income, however, the fee-only and advisor as portfolio manager are experiencing high growth rates. —David A. Geracioti


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