What ever became of RBC's RIA custody unit after it showed such promise

Globally, the Canadian banks were the most sound during the crisis. They probably remain the most solvent counter-parties and are known for making careful long-term commitments. We have had Canadian clients and found them strong.

Marketing has not been a strong suit, partially because the US is so much bigger and more diverse. It takes time and a lot of money and help from domestic firms to enter the US. We have a substantial woman advisor client who moved to RBC where she is treated very well – along with her clients. She had worked for a US bank and was treated very poorly. It was a men’s club, locker room work environment.

Canadian banks and insurance companies to play a “long game” so don’t count them out.

If the RIA business is using the same technology platform as the B/D – I think we have identified the problem!

RBC, or the old Dain Rauscher the product of two first rate regionals, is a first rate brokerage firm which still harkens back to the era where the consumer was important. You can’t find that culture any more. Wells Fargo (the old Wheat, First after numerous mergers) maintained that focus until Prudential was subsumed with in the organization.

RBCs stregnth of still having a client focus is also its challenge. As client focus in a brokerage context is much different than in an advisory context. It is the difference between a broker selling an investment advice product (as an IAR with no accountability or ongoing responsibility to fulfill their fiduciary duties due each individual client) and an advisor addressing and managing investment and administrative values on behalf of each client in the client’s best interest..

RBC is the canary in the coal mine. Will it self-select to compete, or remain insular to the best interest of the investing pubklic as defined by objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters.

If it self-selects not to compete in advisory services in the consumers best interest, then by definition if they were to excel in the RIA space, built around advice, it becomes self-defeating. RBCs move to cultivate the RIA space was a stroke of genius strategically as it only stregnthens its competitive market oposition in the brokerage business. Yet, by not being effective in the RIA space it hurts its brokerage business by being insular to the driving market forces which are redefining the industry .

No brokerage firm has yet to reconcile the fiduciary standing of its brokers with its current product distribution/commission sales business model.

Modernity in processes, technology and work flow management enable advisors to provide an unprecedented level of investment and administrative counsel at a far lower cost than commission sales while better compensating the advisor. The calculus favors modernity. Advisors control their professional standing, their value proposition and their margins in ways not possible in a brokerage format.

The canary does not have to die, let’s hope for a healther and happier outcome.

SCW

Where is Sanjeev Rajput?

SM,

I am sure Sanjeev Rajput is a fine fellow, but he has no control over the processes, technology, work flow management and conflict management necessary to make advice (fiduciary standing) safe scalable, easy to execute and manage as a high margin business at the advisor level.

Only if one treats advice as a product the broker sells rather than an expert authenticated prudent process that the advisor manages, is it possible that hiring a person, regardless how capable, would have an unrealist expectation that the hire could fulfill each brokers fiduciary responsibilities. Clearly there is a misunderstanding of advisory services and the role of Mr. Rajput.

This is why advice is a process (Asset/LLability Study, Investment Policy, Portfolio Construction, Monitioring and Management) that the advisor manages. Advice is not a product which can be sold as there are significant on going responsibilities and accountabilities for recommendations which are not addressed in a suitability standard. The value added and professional standing is derrived from the rigor of an expert authenticated prudent investment process and the skill of the advisor.

The entire fiduciary debate is about retail investors having inferior consumer protections under the law enjoyed by other investors and the brokerage industry’s practice of not acknowledging or supporting the fiduciary standing of brokers inthe best interst of the investing public as required by objective, non-negotiasble fiduciary criteria of statute, case law and regulatory opinion letters.

Mr Rajput has been put in an impossible position to single handedly directly fulfill the fiduciary duties of thousands of brokers to each of their individual clients. This can only be done by the properly resourced broker.

None of the brokers Mr. Rajput serves has access to the enabling resources essential to their fulfillment of their fiduciary duties. Thus, it is not the brokers or Mr Rajputs fault that RBC is not effective in the RIA space. RBC has a role to play in all this, as does every brokerage firm. This is not a question of just selling another product, it is a question of accountability and responsibility for recommendations anf the trust and confidence of the investing public.

Why under the regulatory auspices of FINRA and the SIFMA is it a violation of the internal compliance protocol for brokers at any firm to acknowledge they render advice and owe their client’s ongoing fiduciary duties as required to act in their client’s best interest? It is because it triggers fiduciary responsibility for the broker for which the broker/dealer is responsible. Professional managers in the industry, such as Mr. Rsjput, know the best interet of the investing publiccan very effectively be supported—just the brokerage industry has self-selected not to do so.

In the old days this problem would be immediately resolved in the consumer’s best interst with out a problem. Today it is called complex because the industry is no longer abiding with the best interst of the investing public. The trust and confidence of the investing public is lost and brokers themselves are loosing faith in their firms douing the right thing, placing them in an untenable position.

This is not an RBC problem, it is an industry wide problem that has required an act of Congress to rectify which even today is being thwarted by industry insularity to actions required to assure public trust.

SCW