Dynamic Wealth Advisors

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 ‘Series 65 Exam’

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.


Choosing the Right RIA Firm for Your Practice – Part 1
Wednesday, October 27th, 2010  |  Filed Under: Going Independent, Practice Management

Understanding Your Options       Part 1 – Roll-Up RIAs

 We have discussed the advantages of joining an Independent RIA 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?    

In a series of posts, we will examine several typical RIA service models that prospective advisors can consider when deciding to join an existing RIA – and we’ll compare each to the DWA Independent Advisor platform.  We will examine one model type per post to keep things simple. 

Part 1 – Roll-Up RIAs

Part 2 – Employer RIAs

Part 3 – RIAs owned by firms with affiliated “independent” broker-dealers

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’. 

Roll-Up RIAs

Roll-up RIAs are structured in essence, as a vehicle to ‘pool’ the assets of many advisors in order to create and grow a single larger entity.  These firms are often referred to as “advisor owned” companies, and position advisors as shareholders of the parent company. 

The roll-up RIA business model transitions advisors into their operation by buying a portion or all of advisor’s existing RIA or practice, and then executing what is typically a long term contract to grow business. The advisor’s payout is generally 30%-40% with various incentives.

In this arrangement, advisors maintain their individual client relationships.  Advisors no longer have complete direct ownership, and in some cases, any ownership.  The roll-up typically offers a definitive and proprietary strategy for managing advisor’s clients’ money, and generally requires the advisor to adopt the “firm way” of doing business. 

Advisors operate exclusively under the brand of the roll-up RIA and the services and tools provided to the advisor are generally proprietary.  Advisors often operate from the firm’s office space and have access to support staff, who are employees of the roll-up firm. 

The roll-up may or may not be affiliated with a broker-dealer for commission business. If an advisor is interested in providing commission-based products, additional research is required to ensure the desired b/d service is available.      

Exit strategy is usually limited to the future sale of roll-up entity after the firm aggregates many advisor businesses and assets.

Roll-up RIAs generally seek advisors with $100mm or more of AUM, although less than that is becoming more common.

Now, let’s see how the typical roll-up model compares to DWA’s Independent Advisor model. 

Both service models can offer advisors the tools and resources they desire for their business; the DWA platform however, offers unmatched flexibility because we never limit advisors to a narrow set of services and products, and there are no proprietary products.  DWA understands that one size rarely fits all.  This is precisely why we developed our open architecture service model for advisors, which offers a broad selection of investment management choices, custodians, options for additional service providers, and integrated technology solutions. Advisors, and their clients, deserve nothing less.

The roll-up model offers advisors partial ownership in the parent company, but it also strips advisors of ownership of their individual client relationships, accounts and revenue streams.  DWA’s Independent Advisor model allows advisors to preserve ownership of their individual clients and accounts, and their practice.  With DWA’s service platform, you maintain your valuable relationships and assets, and we provide you with support solutions to help manage your practice and grow your business.  You also enjoy the systems and processes that enable advisors to experience significance efficiency.  You may choose where you work, see clients and how much or little you spend on your practice. Ultimately, the total DWA platform translates to helping you realize a much greater value for your practice, should you decide to sell all or part of your business.  

DWA’s independent advisor model is proving to be the platform of choice for advisors who are seeking to operate and develop a client-centered, independent practice.

Brokers Flee Brokerages As Declining Assets Show Broken Model
Tuesday, October 26th, 2010  |  Filed Under: Going Independent

More examples of the movement from traditional brokerage firms to RIA only model. Note the points about conflicts, big firm product pushing and the frustration that advisors experience in these environments.   Have a look around the RIA only business model and you quickly realize there are vast resources and much more client centered approaches to doing business.  There’s good reason for the growth at RIAs and third party asset custodians.  

Here’s an exerpt from the article that appeared in Bloomberg.  “The big banks, which count on their brokerages to generate a steady stream of fees, are losing assets as well as brokers. Assets under management at the four top brokerages dropped 16% to $4.75 trillion from 2007 through 2009, Aite Group says. During the same period, assets jumped almost 14% to $1.54 trillion at independent firms.” For more on this article, click link below.


Fidelity says bigger broker teams going independent
Thursday, October 14th, 2010  |  Filed Under: Going Independent, Practice Management

Fidelity Investments on Thursday said while breakaway brokers may be shrinking in numbers this year, they are much bigger in terms of the client assets they manage.

In the first nine months of this year, nearly 120 brokers or teams with a combined $8 billion in assets, left big brokerages to form independent firms that use Fidelity for custody services. In terms of assets per breakaway, that is a 26 percent increase.

click below to read more


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.

Ibbotson Finds Liquidity Rules
Sunday, October 3rd, 2010  |  Filed Under: Practice Management

Seeking to mine gold from market inefficiencies, academics have spent decades trying to discern persistent patterns behind the statistical returns on different classes of equities. Advisors have watched them debate the merits of small-cap stocks vs. large-cap counterparts and value vs. growth.

But Roger Ibbotson, founder of the eponymous investment research and consulting firm and chairman and chief investment officer of Zebra Capital Management, has discovered another dimension to the performance analysis landscape: liquidity. Keynoting the first annual Innovative Alternative Investment Strategies conference in Chicago on July 28, Ibbotson discovered stunning return differentials with equities when they are classified according to their liquidity.  Click below to read more….http://www.fa-mag.com/component/content/article/5956.html?magazineID=1&issue=152&Itemid=73

Are Small RIAs Getting the Squeeze?
Friday, September 24th, 2010  |  Filed Under: Custodians, Going Independent, Practice Management

“The smallest RIAs on the Fidelity Institutional Wealth Services platform will soon have to pay a much larger custody fee. Registered investment advisors who keep fewer than $10 million of assets parked with the Boston-based RIA custodian will need to pay a quarterly fee of $2,500, starting with a bill on Dec. 31……”  

This is the latest change from one of the industry’s largest asset custodians for RIAs.  As their business matures, custodians smartly evaluate the viability of their RIA relationships, and of course, assets are the name of the game.  Lower asset levels, competitively priced ticket charges and smaller accounts typical of smaller firms all translate to lower margins for custodians. Thus, some custodians are looking for ways to offset the differential, and some may argue, to entice smaller firms to merge. For start-up RIAs or firms below $30 million, there’s a constant challenge to ensure that the services and pricing used in your model doesn’t change.  Other areas that impact smaller RIAs are access to top level services teams, ability to hold alternatives and access to the management sometimes needed to resolve more difficult client issues. 

The AUM and profitability levels at which custodians derive their decisions will ebb and flow with business cycles and the evolution of their businesses. Unfortunately, smaller RIAs will always be at a disadvantage.  Not unlike low producing brokers at wirehouses, these RIAs will be subject to the shifting landscape to a much greater extent than firms over $100 million. With increasing regulatory issues, potential changes in custody services and pricing, and need to stay abreast of a broader range of issues to properly service clients, the industry may experience an increasing interest from smaller firms to merge, outsource services and refine their business models.    

For a complete copy of RIAbiz.com’s article, please click below.