Last October was another milestone for us: we broke free of our broker-dealer. Champagne was in order as we created our own RIA and now work as fee-based advisors.
If you managed to look up my FINRA record, you will see we have been with a number of BDs over the last few years. In general, the experiences have been far from stellar.
Here is why we decided to create our own RIA.
1. Better Control of Client Experience
Some of the final straws for me were several experiences our clients had suffered at the hand of our last BD.
First problem case: We had forwarded a check to the home office, where staff member No. 1 dutifully logged it in. No. 1 had to transfer the check to home office staff member No. 2. Somehow it was lost between these two. Did I mention this was a check for our quarterly financial planning fees?
With many of our long-term clients, I could just call them and tell them what happened. They are pretty go-with-the-flow as a group and have worked with me long enough to believe me when I tell them that it was the BD who made the error, not us.
Unfortunately this was not a long-term client and it was a Nervous Nellie to boot. After assessing the situation, I felt I was better off just eating the lost fees, because I wasn't sure a new client would believe it was the BD who lost the check. Likely they would think I was covering my own derriere for a mistake made by my team. In the long run, I felt, I should pass on the fees and preserve the relationship. I would keep my mouth shut on what it cost us and not let the client know.
Unfortunately the BD wouldn't allow for that. They required me to call the client and tell her what had happened. They weren't even on the call to confirm I was telling the truth. As it turned out the client hadn't noticed the check wasn't cashed and yes, it did put some doubt in her mind about our competence. I am hopeful we will be able to keep this client—time will tell.
Second and third problems: Speaking of our quarterly financial planning fees, we had not one, but two, clients where the BD, through their RIA, billed them twice for our fees in the same quarter.
Fourth problem: A couple of years ago, after a lot of mishaps, I thought I had found the perfect BD. I had known them for years and done a lot of speeches at their annual meetings. I told them the only way I would leave was feet first.
Everything was hunky-dory for about 10 months, until they sold the firm to a much larger one to get out from under a financial crisis. This required us to repaper our clients for the new firm.
This wasn't a crisis and most of the clients were pretty understanding, although it was a headache on our end.
One year later the new BD changed its name, requiring another set of paper from our clients. This time, the clients were not nearly as understanding and complained a lot. It made many of them nervous and question the relationship with the BD and us and everyone's financial strength. We weathered the storm but it took more work to keep the clients happy.
This time when we had to repaper the clients, it was to my own firm—I knew it would be the last time.
It turns out my timing was perfect. About six weeks after we moved clients over to my own RIA, the last BD announced they had been purchased by a VC group—which would have necessitated yet another repapering. Crisis averted.
2. Providing Services a BD Prohibited
