"Capitalism abhors a vacuum." I heard that phrase for the first time in a radio interview with Michael Okrent, the journalist and writer, who recently authored Last Call: The Rise and Fall of Prohibition. Okrent was referring to the reaction among many entrepreneurs once the 18th amendment was placed into the Constitution in 1920, explaining that a pharmacy chain like Walgreen's in Chicago prospered during the era of no booze by selling plenty of "medicinal" alcohol to consumers. He may not have originated the phrase, but Okrent's aphorism is applicable to you and your business, particularly when combined with another adage like "Imitation is the sincerest form of flattery."
One of the changes that have taken place over the 30 years that Investment Advisor has been serving advisors is that choice has increased for both RIAs, broker/dealer reps, and their clients. The wirehouses remain, albeit transmogrified, and while there has been some consolidation in the independent broker/dealer universe and margins remain very tight, that channel has proved its resilience.
The ranks of RIAs have steadily been increasing, as David Tittsworth of the Investment Advisers Association pointed out during a recent IA-sponsored Webinar on financial services reform. The sustained growth of dually registered firms has been well documented. The breakaway-broker tsunami may be more like a steady swell than a moving wall of wirehouse water, but it's certainly true that many wirehouse brokers are reconsidering their affiliation options.
And there are more folks who want to provide those options, such as our cover story firm, RBC, whose pedigree may be in the regional brokerage space out of the upper Midwest but who is clearly hoping to entice RIAs to its custodial arms by combining its institutional trading strength and research (backed by a AAA-rated Canadian bank) with white-glove personal service provided by a key team of former Bear Stearns custodial personnel to service high-end advisors focused on wealthy clients. While that sounds quite a bit like Pershing Advisor Solutions' professed value proposition (absent the Canadian and Midwest parts of the equation, but with the same strongly rated bank behind it and a global reach), there's no doubt of the quality and commitment of RBC's people and operations.
