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Beyond Independent

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On the Right Side of the Way Things Work.

A blog about moving beyond independence for financial advisors

Posts Tagged ‘RIA Regulations’

RIAs No Longer Alone…FINRA Really Wants to Join Your Business
Monday, March 28th, 2011  |  Filed Under: Going Independent, Legislation

The Financial Industry Regulatory Authority (FINRA) announced last week that it has hired Michael Oxley, one of the authors of Sarbanes-Oxley regulation to lobby on its behalf to be the self regulatory organization to oversee the RIA business. This strategy is definitely representative of the broker-dealer SRO’s interest in ensuring it maintains a key position in regulating RIAs. One might also make the case that Finra is pulling out all the stops to ensure they have control over the fastest growing segment of the advice business, RIAs. As more and more advisors shift their business from commissions to fees, the greater the probability that they transition completely to the advice model, leaving behind broker-dealers and Finra regulation.

So, is this move by Finra self preservation or in the best interest of the industry? This remains to be seen, but if you’ve kept up with this topic at all, you understand (but may not agree with) that it is highly likely that more regulation and review will be coming to the RIA business model. Finra has developed the examination process for broker-dealers and some of this infrastructure and experience could be used to exam RIAs. The SEC has admitted it lacks the resources and with budget battles, is not likely to experience an increase in funding needed to properly oversee all RIAs. The state agencies overseeing RIAs are cash strapped as well, so there’s only a remote chance that they would be the sole oversight organizations. Don’t expect this to be resolved anytime soon. There’s lots of lobbying and debating yet to occur on Capital Hill and within the advisor community. Bottomline, there will be more oversight in the future. If you have a view about regulation, now is the time to offer it to your senators and congress before we end up with some like Sarbanes-Oxley for RIAs.

For a link to a recent Investment News article about this topic click here. More.

RIA Administrivia
Wednesday, January 5th, 2011  |  Filed Under: Custodians, Going Independent, Practice Management

How to Move from Administrivia to Improved Productivity and Enhanced Lifestyle

Small to mid size registered investment advisors encounter many of the same challenges that other individual fee based advisors experience trying to operate an efficient practice while managing a growing and increasingly complicated business model. Whether it’s staffing demands, increased regulation, dealing with the need to upgrade or integrate technology, or just plain not having an organized and systematic approach to their business, RIAs can quickly become burdened with excessive administrivia. Ironically, the success advisors have attained with their clients invariably results in a growing need for breadth and capacity that is typically difficult to muster up in a small business. Moreover, advisors often times become distracted in their attempts to solve for these issues at the expense of their client relationships and service.

Firms that are most affected with the administrivia affliction tend to be solo practitioners or smaller RIAs, but it’s becoming increasingly common for larger firms to seek outsource solutions to mitigate the operational, compliance, technology and even investment management challenges that are part of operating an RIA.

As a result of many conversations with principals of RIAs experiencing administration overload, Dynamic Wealth Advisors created RIA services that help firms to help them refocus their efforts on their clients and developing their business. Among the services offered by DWA are:

  • Access to DWA’s wealth management platform with unified CRM, portfolio management and financial planning solutions, email, electronic workflow, document management and storage.
  • Account services including processing applications with custodians, trust companies and other investment management companies
  • Account billing, fee payment, and performance reporting
  • Data aggregation and reconciliation
  • Custodian management services that enable the firm to access custody with major institutional asset custodians with preferential services and pricing
  • Access to institutional investment management solutions including asset allocation models

The combination of these services may be altered based upon the needs and resources of the RIA. As with advisors using DWA’s IAR services, RIAs will be in a much better position to dedicate their time and attention to their client relationship, service, development of their businesses, and hopefully enjoying their success and freedom from administrivia .The past few years have shown an increasing interest in the RIA business model. No doubt the industry will continue to see growth in both the number of advisors and RIAs for the structure enables advisors to perform wealth management services in a manner that best aligns their interests with their clients. Whether advisors choose to establish their own RIAs or join an existing RIA, DWA is positioned to successfully provide the services and guidance that firms and advisors need.

Choosing the Right RIA Firm for Your Practice Part 2 – Employer RIAs
Sunday, November 7th, 2010  |  Filed Under: Custodians, Going Independent

 Many advisors understand the advantages of joining an independent RIA, as we have touched on in earlier posts. But for some advisors, the decision to do so only creates more questions and can be mired in confusion. What type of RIA service model best fits your needs? This is the second in a series of posts in which we examine several typical RIA service models that prospective advisors can consider when deciding to join an existing RIA – and we are also comparing how each stacks up to the DWA Independent Advisor platform.

Part 1 – Roll-Up RIAs, Part 2 – Employer RIAs, Part 3 – RIAs owned by firms with affiliated “independent” broker-dealers – coming soon!

Each of these service models has its advantages and disadvantages, so carefully determining your needs and preferences, and understanding the characteristics of each model is crucial to finding your ‘right fit’.

Employer RIAs

As their name implies, ‘Employer RIAs’ are structured to allow individual advisors to join the firm as an employee. The primary benefit of this arrangement for the advisor is being able to take advantage of the existing RIA advisory model, without having the responsibilities of starting and running a firm. The benefit to the firm is, very often, acquiring the advisor’s AUM. In this model, the advisor fully transitions to the existing firm’s branding and resources. Advisors are typically required to operate from the firm’s office and support is provided by firm staff. Branding and resources are defined exclusively by the firm, and there is little to no room for deviation from set standards. There are variations between ‘Employer RIA’ platforms. For example, in some models advisors turn over ownership of their clients to the firm; in others, advisors may retain client ownership, but sign over AUM. These firms typically provide money management services which are proprietary and, many times, restrictive. Custodians may or may not be limited. In this model, the firm is generally not a broker-dealer but may offer options for commission business as an option. Upon signing with an ‘Employer RIA’, the advisor generally receives a “payout” ranging from 50% to 70% of fees.

 The DWA Independent Advisor model offers many of the attractive benefits of the “Employer RIA” without the drawbacks. In the DWA model, advisors enjoy all the benefits and freedoms of running their own advisory business – but can leave the resource-draining details of operations, compliance and logistics management to the DWA team. Additionally, DWA offers advisors a broad range of services in an open architecture manner, including choice of investment management and custodians. And this flexibility won’t break the bank – advisors are simply charged a service fees based upon AUM. Best of all, DWA makes it possible for advisors to run their own profitable and rewarding business. By providing advisors with dedicated support resources, leading-edge technology, and an engaged community of like-minded advisory business owners, DWA advisors are truly independent, but never alone.

Finra and IAA square off in adviser oversight battle
Tuesday, November 2nd, 2010  |  Filed Under: Going Independent, Legislation

“The SEC’s study of fiduciary duty has inspired thousands of comment letters and nearly two dozen visits to the agency by interest groups. But a report that may have just as big an impact on the advisory industry is garnering little attention.” to read more click below.


Most Clients Follow Advisors Who Go Independent…Surprised?!
Monday, October 4th, 2010  |  Filed Under: Custodians, Going Independent, Practice Management

Recently, one of the industry’s top asset custodians hosted a webinar about “going independent”.  As unsual, there were a few advisors and consultants who served as subject matters experts discussing the opportunities and challenges with moving towards an RIA model of business. One of the attendees asked what is the obvious question to the panel of advisors: “Were you successful in moving your clients to your new firm?” While all emphasized that preparation was crucial to their transitions, every one responded that they moved in excess of 90% of their clients to their independent firm. In one case, an advisor commented “more than 100%” because he managed to pick up accounts that some of his clients had at other firms.  Having spent twenty plus years on the “independent” side of the tracks, these comments were no surprise to me. Frankly, the surprise is always the advisor who doesn’t understand that most clients have no allegiance to brokerage firms. Rather, if they like and trust their advisors, they will move with them.

Having a successful transition takes carefully planning, as emphasized by this particular advisor panel and experts. The following are some of the key areas on which you should focus when thinking about your transition:

1.  Create a detailed plan. While this seems obvious, a thorough plan that considers your financial, opertional, legal, regulatory and technological functions is absolutely necessary.

2.  Seek out experts at custodians, consulting firms or the RIA firm with which you affiliate. Finding an RIA that has solid relationships with custodians, and extensive experience with transitions of business from firms like the one you are exiting is a great way to avoid “reinventing the wheel”.

3.  Understand the Broker Protocol and whether it applies to you. Again, dealing with an expert and/or firm that has experience is essential.

4.  Plan sufficient time and resources. Unless you decide to affiliate with an existing firm, plan to spend several months researching, developing and solidifying your infrastructure. The key benefits of working with an proven RIA is that you will be able to leverage its experience and substantially reduce the time to transition, and the on-going operational issues that you would face if going at it alone.

RIA State Registration Issues: “Frustration Mounting”
Thursday, September 23rd, 2010  |  Filed Under: Going Independent, Legislation, Practice Management

“…………With many RIAs staring down the onerous task of registering in multiple states, while coping with a new, more demanding ADV form, frustration is mounting at the lack of information from the SEC and the lack of uniformity among the states…….”

Here’s more news about the ever more challenging regulations for smaller RIAs that must register with states. It’s getting more complicated by the day.  Even the head of NASAA (North American Securities Administrators Association) doesn’t quite understand the implications of new regs.  When faced with increased requirements and administration in other areas as well, smaller RIAs may begin to seek options, including merging with other firms.


“Plain English” ADV Requirement Controversial
Friday, September 3rd, 2010  |  Filed Under: Going Independent, Legislation, Practice Management

The SEC’s new reg that requires RIAs to describe their offerings and backgrounds in simple, easy to understand English seems to be getting rebuffed by advisors. The regulation will require a “plain English” approach that some say will take significant time to prepare. Since most advisors rely on consultants for these types of tasks, time translates into more costs for the RIAs. There seems to be some continued consternation about whether the regs require certain past customer complaints — whether resolved in favor of advisor or not — to be disclosed. But, most astonishing is the apparent resistance noted in seveal articles and blogs about having to disclose past bankrupties and other negative history.   While states have yet to require plain English, it appears they will move in this direction as well. Here’s a link to a recent Financial Advisor article.