Page 37 - Investment Advisor June 2021

MINDY The name of the game is meeting people where ferent models of affiliation. That’s pretty much true across
they are. It’s about trusting the advisor, whether they’re an the board.
employee with a contract that says that the firm owns the Stifel just announced they hired Alex David from Wells
clients or an independent advisor who owns the clients. Fargo’s independent unit. RBC has served as a custodian his-
Regardless, it’s about the bond between advisor and client. torically [and has been growing its wealth business]. We know
Every firm attempting to recruit would do well to honor that about all the channels at Raymond James. Ameriprise has
bond. That means they should respect that as long as an advi- multiple ways to affiliate. This is the way they’re changing and
sor is compliant — and has his or her clients’ best interests at expanding. They’re also improving their technology.
heart — firms need to listen to what’s most important to the In addition, they’re drastically improving the quality of
advisor. Meet the advisor where he or she is. They’d be wise their advisor population, and hence their cultures are being
to do so, and they’d win a whole lot more. advanced because of that. New advisors that firms like
Raymond James, RBC, Stifel, Ameriprise and Janney are
What else do you see in the future for non-wirehouses BDs? recruiting and productive. There are quality advisors coming
LOUIS If you look at the non-wirehouse broker-dealers on on board because their business models have been validated
the employee side, all of them are experimenting with dif- and become popular.

Other Fees we’ve been heavily focused on helping advisors who want to
Strong sales of exchange-traded funds already have cut into lower advisory administration fees and face no ticket charges.
mutual fund sales. This is a revenue disruptor for broker-deal- Because they impose ticket charges and higher adminis-
ers, since mutual funds have substantially higher revenue- tration fees, clearing firms likely will become less attractive
sharing arrangements than ETFs. places to custody advisory assets in the future.
The trend toward more ETFs and fewer mutual funds The administration fees have a net cost to the broker-deal-
appears unabated, so BDs’ mutual fund revenue is poised to er of around 3 basis points of assets, which are often marked
keep diminishing. Also, fee-based accounts have their own up by the BD to 10 basis points or more. With fewer advisory
issues in terms of expected revenue disruption going forward. assets in brokerage accounts, another once reliable profit
Reg BI brings the practice of charging a fee on an alternative center for broker-dealers is set to diminish.
investment into question. These investments are illiquid, and an
advisor can’t make any sort of changes to the investment. But Executive Perspectives
they charge a fee to manage the asset anyway, which makes “The risks that come with being a financial professional and
about as much sense as fees for “managing” fixed annuities. an advisor are endless,” according to Brubaker-Rager. “The
Broker-dealers have their sacred profit centers, with advi- biggest risks that keep me up at night include cyber, product
sory administrative fees being one of the largest and most and market-event risks that result from the increasing popu-
reliable sources of this income. As advisors experience fee lation of claimant attorneys, who actively solicit investors to
compression, they’re discovering that one way to lower such sue advisors and financial institutions with promises of recov-
pressure is to bring down the amount clients pay in advisory ering market losses. The most significant, however … is the
administration fees and ticket charges. risk of being a regulated FINRA member.”
For example, advisors paying a BD 30 basis points on cli- While the time and financial resources necessary to interpret
ent assets — to cover administration fees and ticket charges FINRA rules are immense, it’s “never enough to avoid the end-
for an all-inclusive fee account — may find out that they can less regulatory requests that can span the course of two years,”
custody these assets at Schwab or Fidelity and have no ticket she explains. Because FINRA has devoted a great deal of time
charges on ETFs and stocks. In addition, a growing number and resources to a situation, it’s unlikely “they would be willing to
of broker-dealers will do the administration (billing, perfor- walk away with no action or simply a letter of caution,” she says.
mance reporting and rebalancing) with Orion, say, for roughly For these reasons, many of the brightest, most seasoned
$100 per account each year. compliance and supervisory professionals, as well as FINRA-
Adobe stock to 95% — saving the client large sums. Ever since Charles affiliated financial professionals, “will continue to migrate to
The savings is shocking, as advisors can cut costs by up
purely investment advisory roles over the next few years,”
Brubaker-Rager concludes. —Jon Henschen
Schwab, TD Ameritrade and Fidelity went to no ticket charges,

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