Two Texans talk turkey about moving from an IBD model to an RIA model
Jeff McClure was able to bring Sean Kernan closer to his way of thinking by letting him in on his experiences
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October 5, 2018 at 7:40 PM
LPL Financial
RIA-Friendly Broker-Dealer, RIA Welcoming Breakaways, Advisory Firm
Top Executive: Dan Arnold
Paul Spitzer
Great article! B/D Reps that come to the Advanced Practice Advisors, RIA (www.apa-ria.com) platform initially see the need for a “Friendly B/D” relationship to facilitate their commission business. As time goes on they realize how much time and money it takes to maintain the B/D relationship and discover that most of the product they previously needed the B/D for is now available in a RIA priced share class they can bill on. Soon the wind down the B/D relationship and transition everything to fee based and become a true fiduciary to their clients and don’t have that built in conflict of interest when they switch hats.
Jeff McClure
Paul,
If I read your message correctly you are stating that we are not “true fiduciaries” because we insist on not liquidating a variable life policy of a client who is in poor health. Frankly, you are out of line. A fiduciary is one who acts on behalf of another in that person’s best interest. It has nothing to to do with a pure “fee-only” position.
I find it interesting that you claim that “most” of the product is available. So, are you proposing that we drop our practice of advising clients who have substantial assets in variable products that have benefits they need, or that we increase charges to them solely for our convenience?
Sean Kernan
One thing I didn’t make clear is that I use LPL’s corporate RIA for advisory accounts (about 40-50% of my business). That is certainly more restrictive than being an independent RIA. However, the overall independent b/d arrangement is a breath of fresh air compared to the employee b/d world for me and my colleagues. Also, the one platform that LPL can provide—even for independent RIAs that want a hybrid arrangement—is very attractive for ease of advisor and client use.
Paul Spitzer
All I said is that most product is now (or is becoming) available in a RIA share class.
Sean Kernan
Paul—I wasn’t addressing your comments, just the article generally.
Sean Kernan
Oh whoops—Paul, I now see it appears you were responding to Jeff’s comments, not mine.
Sean Kernan
“A fiduciary is one who acts on behalf of another in that person’s best interest. It has nothing to to do with a pure 'fee-only’ position.”
Jeff, I believe your comment above is exactly the point I was getting at with my initial comments in our “discussion.” The definition of “best interest” is wherein lies the rub. I think customer/client/consumer should get some say in what is in their “best interest.” I don’t know how often it is truly done, but I would even say that one could truly ACT as a fiduciary in a commission-only business. I know that legally the b/d would not acknowledge that capacity, but I am saying that an individual advisor/agent/rep/consultant/planner/salesperson/IAR could approach his responsbilities that way.
If one treats their “customers” that way, odds are the legal distinction would never come up since they wouldn’t have any legal problems. I speak partially from experience here—but granted, my 10 years is not a terribly long experience.
