Investment Advisor's annual broker-dealer survey is far more about celebrating a small handful of large BDs than it is about helping the readers sort through and understand them; the data focuses on 50 of the thousands of independent BDs in the space, and any analysis that might be considered controversial is immediately tossed into the wastebasket. So we don't learn a lot, and what we do learn is a bit suspect, since some firms just gave round numbers that are clearly off-the-top-of-the-head estimates, and some of them might have been backwards, since, with a quick calculation, you have a few BDs losing significant amounts of money on their operations.
I'd use the Financial Planning BD survey as my guidebook, and turn instead to the Mark Tibergien and Angie Herbers columns on the severe limitations of compensation structures, or Bob Clark's synopsis of Knute Rostad's response to the recent SEC request for information.
[Read more »]
Roy Diliberto's columns are always good, but this month's is a gem; it talks about the sources of dissatisfaction in a client/advisor relationship, and I suspect that these practices are widespread and innocent; you don't realize how they look from the other side of the table. Philip Palaveev offers his best advice on mergers, saying that there are a LOT of them in process right now, and that many advisors have the process backwards. They need to create a common vision together first, and THEN worry about the financial details.
Speaking of mergers, Mark Hurley offers an excerpt from his recent white paper, talking about acquisitions from both sides of the table--and I think this may have been the best information that the paper offered. And Joel Bruckenstein offers his take on an entirely new desktop solution for advisors, offered by Fidelity Institutional.
[Read more »]
This is a really good issue of Financial Planning magazine, with marketing advice from Deena Katz and John Bowen, a review of an interesting stock analysis app for the iPad, and an interview with Joe Duran of United Capital. But the bulk of the attention will go to the broker-dealer survey, which is orders of magnitude more comprehensive than what you'll see at Financial Advisor and Investment Advisor. You can see my writeup below; the magazine was not afraid to include a lot of financial information and breakdowns of business revenues by source, which give you insights into the BD business as a whole. One thing to note: growth was slow last year, and although "fee-based" revenues are rising, commission revenues--which still make up an aggregate three-fourths of the money BDs take in--are down pretty much across the board.
[Read more »]
I find it interesting that brokerage firms are squawking about the "onerous" Department of Labor rules that would require advisors to qualified plans to be fiduciaries (though not nearly as loudly as the Financial Services Institute), but they are quietly creating subsidiaries that will comply with the fiduciary rules. I think it's obvious that the subsidiaries and departments will have cozy deals with the very same in-house providers that currently service these plans in very non-fiduciary ways, but that shows us two things: that the brokerage firms see the handwriting on the wall and expect to lose this futile argument, and that whatever rules the Department of Labor finally issues will be instantly undermined by clever shell games created by very smart, crafty executives at the firms who created the problems that the rules were supposed to address.
If you prefer not to give yourself heartburn, read Philip Palaveev's article, which outlines the business path of advisory firms, alongside Mark Hurley's article, which addresses the same issues. Palaveev believes that advisors have a choice about whether (or not) to build a sustainable business enterprise in the advisory space, and if they decide to take that route, he offers some great advice. Hurley, on the other hand, argues that the fate of most advisory firms is largely determined already by choices they have made in the past, not to create enterprise value or leverage the owner's time and compensation. It's a very interesting contrast in visions. [Read more »]