[quote=AllREIT]

[quote=planrcoach]

Regulation certain seems to have made some recent
strides. I can see a scenario where some of the RIAs are cracked upon
next - it may be partly necessary and partly political.[/quote]

RIA's won't face any crackdown since we start from a position of working for the best interests of the client at all times, vs working for the best interests of the firm at all times.

Don't forget the Merrill Lynch rule, RR's are just fancy order taker's, any financial advice is "purely incidental." That's not how you sell yourself to clients, but it is what they will say the firms legal ass is on the line. All they care about is an absense of gross malfeasance (the suitability test), not the best interests of the client.

[/quote]

In a vacuum, that sounds great.

In the real world, from someone who has seen both "sides" of the business that you describe-including the political power in the big securities firms-I think you're being a little naive.

No offense intended, just my bluntly stated opinion.

[quote=mikebutler222][quote=Greenbacks]

It really comes down to the firm putting the rep in tough spot and the client in a vulnerable position. 

Does the rep keep his job by selling a high commision product or get fired for lack of production?

If the firm really cared about the rep or the client they would not put either one in this position!  

Stay out of the wirehouses they give all of us a bad reputation.  

[/quote]

That’s ridiculous.

[/quote]

So Mike you have never seen any one let go for lack of production?

Does a wirehouse keep a low producer because he does what is right for the client? If so how many have you seen?

Can any one on this forum look around there office and say they keep him/her on because they do what is right for the clients? They do not produce much, but management does not care the client comes first!

How many?

If the client truely comes first at a wirehouse there should be some rep in an office somewhere with low production and still has a job after 5 or 10 years.       

[quote=AllREIT]

RIA's won't face any crackdown since we start from a position of working for the best interests of the client at all times, vs working for the best interests of the firm at all times.

[/quote]

As an RIA, you are your firm.  For example, if an RIA takes a flat fee off of the client's assets and the client asks if he should liquidate some of his mutual funds to pay off his house, is that a conflict of interest?  If you say yes, then you lose the fees off of that money. If you say no, you keep your fees.  So, maybe no is the right answer, but it still benefits you.

Not to get into a philosophical debate, but NO ONE EVER DOES ANYTHING UNLESS IT BENEFITS THEM IN SOME WAY. I'm not talking just about money, it could be as simple as holding a door open for someone because it makes you feel better inside.

[quote=Greenbacks]

Does a wirehouse keep a low producer because he does what is right for the client? If so how many have you seen?

Can any one on this forum look around there office and say they keep him/her on because they do what is right for the clients? They do not produce much, but management does not care the client comes first!

How many?

If the client truely comes first at a wirehouse there should be some rep in an office somewhere with low production and still has a job after 5 or 10 years.       

[/quote]

This is Wall Street, not Sesame Street.  Even doctors can't stay in business just because they do good work for their patients.  They still have to make money to pay their bills. You must do what is in your client's best interest AND make money at it. You must do both.  If you don't, then one or the other will shut you down.

This is Wall Street, not Sesame Street.  Even doctors can't stay in business just because they do good work for their patients.

Classicly poetic humorous statement of the advisor's dilemma. Buffeted by Buffet and Wall Street - and Sesame Street.

So Mike you have never seen any one let go for lack of production? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[/quote]

 

Of course I have, but that doesn't support your contention.

[quote=Greenbacks]

Does a wirehouse keep a low producer because he does what is right for the client? If so how many have you seen? [/quote]

What's missing in your equation is that ALL producers are expected to do what's right for the client. LOW producers are let go because they aren't doing what's right for enough clients. They've failed at gathering accounts, clients, relationships and assets, IOW being profitable WHILE doing the right thing. You've turned doing what's right, while failing to open accounts as a virtue. It isn’t.

[quote=Greenbacks]

If the client truely comes first at a wirehouse there should be some rep in an office somewhere with low production and still has a job after 5 or 10 years.       

[/quote]

 

That’s a complete non-sequitur. It’s like saying if management cared about clients they’d have brokers in their employment that “do the right thing” for clients, but have criminal records, or bankruptcy records or insist on wearing jeans and tee shirts to work.

 

Like I said, “doing the right thing” is a minimum requirement and it doesn’t excuse you from your obligation to have enough in assets under your belt to be profitable. Under your theory of management a guy “doing the right thing” who has a single client and generates $150 a year in production is entitled to a desk, chair, marketing and legal protection.

 

I’m just curious, but at your shop, would you keep someone on who “does the right thing”,  produces little and  is to your balance sheet a compliance liability?

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Like I said, “doing the right thing” is a minimum requirement and it doesn’t excuse you from your obligation to have enough in assets under your belt to be profitable.

 

SO THE FIRM COMES FIRST.

 

Under your theory of management a guy “doing the right thing” who has a single client and generates $150 a year in production is entitled to a desk, chair, marketing and legal protection.

 

FIRM AGAIN COMES FIRST.

I’m just curious, but at your shop, would you keep someone on who “does the right thing”,  produces little and  is to your balance sheet a compliance liability?

 

AS AN INDY IF THEY WANTED TO THEY COULD. THEY ARE RESPOSIBLE FOR THERE OWN BILLS. THEY COULD WORK FOR NOTHING IF THEY WANTED TOO.

  WE DO HAVE AN ASSISTANT WHO WE HAND OFF LITTLE ACCOUNTS TOO. THE CLIENTS LIKE HER AND SHE DOES THE RIGHT THING. SHE IS NOT A LIABILTY SHE IS AN ASSET.  

 

 

[quote=Greenbacks] [quote=mikebutler222]<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Like I said, “doing the right thing” is a minimum requirement and it doesn’t excuse you from your obligation to have enough in assets under your belt to be profitable. [/quote]

 

SO THE FIRM COMES FIRST. [/quote]

 

No, Greenbacks, it doesn’t.

 Doing the right thing for the client comes first. If you can't do enough of that, you're gone. You don't have a right to be unprofitable just because you meet the minimum requirement of conduct. Who said having to do more than one thing ("do the right thing" AND do enough of it to be profitable) means that the first thing isn’t first?

 

[quote=Greenbacks][quote=mikebutler222]Under your theory of management a guy “doing the right thing” who has a single client and generates $150 a year in production is entitled to a desk, chair, marketing and legal protection.[/quote]

 

FIRM AGAIN COMES FIRST. [/quote]

 

See above. Doing the first thing (doing the right thing) isn’t the same as saying you only have to do one thing. I have no doubt in your current capacity you not only have to do the first thing, you have to do other things, like make a profit to keep the lights on. That doesn’t mean to me that your clients don’t come first. It means you have to do the right thing for plenty of people to stay in business. The same's true in a wirehouse.

[quote=Greenbacks][quote=mikebutler222]I’m just curious, but at your shop, would you keep someone on who “does the right thing”, produces little and  is to your balance sheet a compliance liability?[/quote]

 

 

 

AS AN INDY IF THEY WANTED TO THEY COULD. THEY ARE RESPOSIBLE FOR THERE OWN BILLS. THEY COULD WORK FOR NOTHING IF THEY WANTED TOO.

  WE DO HAVE AN ASSISTANT WHO WE HAND OFF LITTLE ACCOUNTS TOO. THE CLIENTS LIKE HER AND SHE DOES THE RIGHT THING. SHE IS NOT A LIABILTY SHE IS AN ASSET.  

 

[/quote]

 

You’re confusing the issue here. I didn’t ask if, in theory, an indy could work for free. (BTW, I doubt you’d take the time to do the required OSJ work for someone, much less risk the good name of your firm, out of the kindness of your heart) I asked you if YOU would hire someone with one client who did $150 in business?

 

As to being a liability, in this day and age, everyone who speaks with clients is a potential compliance liability. You don’t have to be doing anything wrong, there’s a cost to defending yourself even from frivolous lawsuits. There's also a cost, even if it's only in time at an indy, to make sure people are in compliance of industry rules.

 

 

 

 

 

 

 

 

 

 

Here's another way of considering it, Greenbacks.

Can you do the right thing for clients, but not have enough clients to do the right thing often enough to be profitable, and thereby lose your job?

yes

Is that equally true of indys as wirehouses?

Yes, the difference being at a wirehouse someone in the firm will show you the door. At an indy office some outside agency will just cut off your lights and phone.

 

If you fail to do the right thing for clients, but do a ton of production, can you lose your job?

You bet.

 

Is that the same for indys as for wirehouses?

Again, yes. At a wirehouse compliance will get you, even if a regulatory body gets you first. As an indy it will be a regulatory body that will get you, unless some else is your OSJ, in which case they should get you first.

Yes, the difference being at a wirehouse someone in the firm will show you the door. At an indy office some outside agency will just cut off your lights and phone.

Yes mike. The only thing worse would be being a weener indy in your own office, doing too much social work (nice to do a little)  paying fifty k or so in business expenses, grossing one hundred k, wishing someone would come an put you out of your misery.

I think we're all just peeing on each other now.  Each model has its own way of making money and charging the client.  You can "cheat" the client in ANY model.  In the commission model you can churn, deceive on MF commissions (A vs. B vs. C), etc...with the fee based model, you can simply collect 1% per year and not do crap for your client.  But that does not mean that ANYONE has to do that.    Perfectly ethical, profitable advisors exist in both worlds.  So do incompetent leeches.  There is nothing inherently wrong or unethical about either model.  The individual makes it or breaks it in both worlds.

Here's an interesting scenario nobody has talked about.  It exists in both worlds.  Prospect comes in with a portfolio from another firm.  Any firm.  It's not necessarily how you would have constructed it, maybe some underperforming funds, maybe a few laggard stocks.  Whatever.  But overall, not too bad.  You rip the thing to shreds.  You tell the prospect that their broker is awful (in so many words).  You do it in order to get the ACAT.  Is that right?  No, of course not.  But being Indy or being from a wirehouse or being from a regional or a bank or Wadell Reed or EDJ or Ameriprise or AGE or PRU does not really matter.  Any of those individuals are capable of those actions.  The structure of their paycheck is irrelevant. 

Here's an interesting scenario nobody has talked about.  It exists in both worlds.  Prospect comes in with a portfolio from another firm.  Any firm.  It's not necessarily how you would have constructed it, maybe some underperforming funds, maybe a few laggard stocks.  Whatever.  But overall, not too bad.  You rip the thing to shreds.  You tell the prospect that their broker is awful (in so many words).  You do it in order to get the ACAT. 

If the portfolio is decent or not, the prospect is shopping. Just educate them a little about what they have there.

What they are likely looking for is touch. (Or not too be touched too much. Nobody calls them, or somebody calls them all the time with transactions.)

You don't say anything about the other advisor, because that is the least tasteful thing about what is going on.

You just listen to them, educate them and get the next meeting to show them some options. If they come to the next meeting, they will become your client.

Everybody gets paid the same, and we are all selling the same stuff.

[quote=now_indy][quote=AllREIT]

RIA's won't face any crackdown since we start from a position of working for the best interests of the client at all times, vs working for the best interests of the firm at all times.

[/quote]

As an RIA, you are your firm.  For example, if an RIA takes a flat fee off of the client's assets and the client asks if he should liquidate some of his mutual funds to pay off his house, is that a conflict of interest?  If you say yes, then you lose the fees off of that money. If you say no, you keep your fees.  So, maybe no is the right answer, but it still benefits you.[/quote]

Not really, I charge hourly and prorate that against a custodianship fee's. Any conflicts RIA's face are de minimus compared to the bread and butter of A-share pushers.

Again, its the difference between a fiduciary responsibility and the Merrill Lynch rule.

Every mode of compensation has a conflict.  ALLREIT, charging hourly is fine, but don't you make more money from a client by billing 2 hours for 1 hour of work?   Ethical advisors treat their clients fairly.  An unethical advisor will remain unethical regardless of mode of compensation.

One area where fee-based fails clients is with insurance.  The best insurance products pay commissions.  This means that someone with an insurance need who sees someone and pays a fee ends up paying both a fee and a commission. 

[quote=mikebutler222][quote=Greenbacks]

It really comes down to the firm putting the rep in tough spot and the client in a vulnerable position. 

Does the rep keep his job by selling a high commision product or get fired for lack of production?

If the firm really cared about the rep or the client they would not put either one in this position!  

Stay out of the wirehouses they give all of us a bad reputation.  

[/quote]

That’s ridiculous.

[/quote]

AGREED.