We use the BD platform to accomodate the VA’s that exist OFF of the

Fidelity RIA platform. That’s it. You’ll typically find that type of

arrangement is more for accomodative actions, rather than generating

business. At the least, I don’t expect to ever write another VA ticket, or

mutual fund ticket on the BD side again.



As for conflicts… I can’t name many. Being paid on a fee-basis means

that regardless of the number of trades done, the compensation structure

remains constant. Regardless of whether or not I advise clients that

holding a large cash position is good or bad, we are still paid for that

advice. Bond allocations, stock allocations, the advisory fee is the same.

If they WERE different, advisors MAY have a conflict since they would be

paid less for managing conservative assets, and may advise clients to be

more aggressive. Keeping a constant fee schedule eliminates this

conflict.



I’ve also seen other advisors who create their own wrap-fee program

within their RIA. This means that the advisor PAYS the transaction fees

themselves, rather than having the client pay for the trades. Generally a

nominal charge for each trade (most mutual funds exempt, but some at

$30 per trade, with $10 equity trades) results. If the advisor pays for the

trades themselves, wouldn’t it stand to reason that absorbing $20,000 in

quarterly trading fees MAY keep them from making wholesale, and

necessary changes? You betcha.



My RIA is fee-only. Client pays the trading costs, and again… they are

small. But, I don’t see where we have a conflict of interest. I’ve explained

where a few may exist for other practices, however, it seems that it’s

certainly the exception within the RIA community, rather than the norm.



So, to answer your question directly… I’m paid on a fee-basis only. No

trails, no commissions, just advisory fees only. I can’t see where I have

COI’s with my clients, but I can see where some may exist, as described

above.



Just my $.02.



Good question.



C

Conceptually I would prefer to pass trading costs through to clients,
but at the moment we pay for them ourselves, to save clients the
nuisance of being billed for them.



I would be hard pressed to imagine doing enough trading that it would be more than minor expense.



My model is that we charge $200/hr for advisory/research services and
1% for custody/management with a 50% soft dollar rebate for advisory
services.



I guess there would be some interest in overselling advisory services,
but clients approve all advisory work (and the time involved) before we
do it. Custody isn’t the cheapest arround, (and some of our clients use
Scottrade), but alot of people want a fully hands off account.



In a theoretical sense, I could be influenced to tell people not to withdraw money from the accounts.



That seems to be pretty much it.



Now would anyone like to buy an annuity?

Now would anyone like to buy an annuity?

Not just yet. Thanks, Captain, Allreit.

If an RIA is negligent with a client's money, (real or perceived), what options do your clients have to recover losses or damages?

[quote=planrcoach]

Now would anyone like to buy an annuity?

Not just yet. Thanks, Captain, Allreit.

If an RIA is negligent with a client's money, (real or perceived), what options do your clients have to recover losses or damages?

[quote=planrcoach]

Now would anyone like to buy an annuity?

Not just yet. [/quote]

You could lose everything in the stockmarket, and be forced to eat cat food when you retire.

You'd better buy an annuity today.

[quote=AllREIT]

[quote=planrcoach]

Now would anyone like to buy an annuity? http://forums.registeredrep.com/smileys/smiley1.gif">

Not just yet. [/quote]

You could lose everything in the stockmarket, and be forced to eat cat food when you retire.

You’d better buy an annuity today.

[quote=Starka]
I might buy one! Do you hold the coveted CFRA designation?[/quote]



I glad you asked . Most clients arent aware of the importance of the CFRA designation.



I do hold the CFRA designation, but decided not to put it on my business card as it would be too much clutter next to my six other designations.



Now, where do you keep your checkbook?

 My model is that we charge $200/hr for advisory/research services and 1% for custody/management with a 50% soft dollar rebate for advisory services.

Please explain rebate - do you reduce the 1% to offset hard dollars paid in fees?

My RIA is fee-only.

Captain, do you carry E&O insurance? How much do you carry, if you do?

[quote=planrcoach]

 My model is that we charge $200/hr
for advisory/research services and 1% for custody/management with a 50%
soft dollar rebate for advisory services.

Please explain rebate - do you reduce the 1% to offset hard dollars paid in fees?

and then you have E&O insurance plus the LLC.

Do you carry E & O insurance for your practice. I understand some RIAs don't carry it - too expensive, and they worry it will encourage claims.

What amount do you carry?

[quote=planrcoach]

and then you have E&O insurance plus the LLC.

Do you carry E & O insurance for your practice. I understand some RIAs don't carry it - too expensive, and they worry it will encourage claims.

What amount do you carry?

[quote=planrcoach]

My RIA is fee-only.

Captain, do you carry E&O insurance? How much do you carry, if you

do?

[quote=Captain] [quote=planrcoach]

My RIA is fee-only.

Captain, do you carry E&O insurance? How much do you carry, if you

do?

Sweet.

Do you feel your personal liability exposure is limited. I understand you have the LLC structure, along with the E & O, so do you feel as safe at RIA as you might with b/d affiliation?

[quote=planrcoach]

Sweet.

Do you feel your personal liability exposure is limited. I understand you have the LLC structure, along with the E & O, so do you feel as safe at RIA as you might with b/d affiliation?

At broker dealer, both the rep and b/d are responsible. I think from client's point of view, there is an extra layer of protection. Even though you keep $1m E&O, b/d can settle to protect their reputation, where client has a legitimate claim that is not strictly covered by the insurance.

I guess anything beyond the E&O, your clients get to sue your LLC, and I assume cash just flows through that structure.

How long have you been at RIA. My concern would be, even though you document nw, goals, risk - in a down market, misunderstanding can occur.

And then I guess you have an attorney on retainer. Let's hope you don't need to use a lot of her time.

[quote=planrcoach]

At broker dealer, both the rep and b/d are
responsible. I think from client’s point of view, there is an extra
layer of protection. Even though you keep $1m E&O, b/d can settle
to protect their reputation, where client has a legitimate claim that
is not strictly covered by the insurance.[/quote]

Who says I can't settle? You are grasping at straws to defend an obsolete though workable business model.

If you run this business in prudent manner with good faith inside of a good business model you will not be sued.

[quote] How long have you been at RIA. My concern would be, even though you document nw, goals, risk - in a down market, misunderstanding can occur.[/quote]

It's not about documentation, its about client education.

[quote]And then I guess you have an attorney on retainer. Let's hope you don't need to use a lot of her time.[/quote]

The B/D has attorney's on retainer as well.

Who says I can't settle? You are grasping at straws to defend an obsolete though workable business model.

If you run this business in prudent manner with good faith inside of a good business model you will not be sued.

Maybe. Point is, from client's point of view, you have your little setup and they take their chances, just like anywhere else. You don't have deep pockets.

Maybe there are not any problems, or if there are problems, you stay in business. Or maybe not.

I don't really know. My point is, you gave up the level of broker dealer protection (for a higher payout), limited your liability and apparently eliminated a level of protection for your clients, and then you attack broker dealer affiliates for being unethical for having other conflicts of interest.

It is nice that you educate your clients, I am thinking from their point of view.

I also know that under the consumer laws of some states, you have personal liability apart from your LLC.

You may be right or wrong, or half right or wrong, it is not clear to me. Anyone has any new insight, it would be appreciated to help clarify the liability/protection question.