Enthusiasm simmers in the wake of the by-invite-only Barron's Top 100 conference

THE INDEPENDENT BROKER BUSINESS MODEL SHOULD NOT BE CONFUSED WITH RIAs

Cerulli is citing growth of independent broker/dealers, not RIAs, but the opportunity is immense for custodians.

Like wirehouses, independent broker/dealers do not acknowledge the fiduciary standing of their brokers nor do they support it, so advice and achieving advisory services scale is not possible. Thus the use of the phrase “independent” is not to imply independent broker/dealers support advice and wirehouses don’t, neither do. To avoid confusion, the RIA business model is not synonomous with the independent broker/dealer model, as Mr Collins a former Wells Fargo FiNet advisor found in starting his own RIA, the Collins Investment Group.

Cerulli is talking about the Independent Broker/Dealer business business eclipsing full service brokerage firms, not the RIA business focused on advice, eclipsing the full service brokerage business focused on transactions.

The challenge for the custodian sponsors of the Barrons 100 Conference is for them to directly or indirectly offer the enabling resources in support of advisory services and fiduciary standing not possible in the brokerage industry so the under resourced advisor(RIA)can achieve operating scale not possible as an individual advisor.

Access to the prudent processes, technology, functional division of labor, statutory documentation, conflict of interest management and advisory services support not provided by the brokerage industry will exponentially grow the RIA business. Presently each individual advisor has to reinvent the wheel to the best of their knowledge and ability requiring expertise in technology, statutory documentation and conflicts of interest in which they have little exposure, expertise or interest. Thus, leaving the door wide open for custodians who accordingly support advice. In that case, Cerulli’s growth estimate would indeed apply to RIAs and those that focus on advice rather than transactions. Every advisor who wishes to act in the best interests of their clients and every consumer seeking expert counsel would be attracted to the RIA model, which is just about everyone.

It is inevitable the industry will be reordered around advice and the consumer’s best interest, it is just a question of having the presence of mind to see the opportunity, having the vision, know how and capital resources to execute. So, in 2015, the brokerage industry may indeed wake up. But for now it is a golden opportunity for custodians or a new generation of advisory services firms like HighTower, United Capital, Clearbrook, etc who will provide those necessary enabling resources which would safely bring easily executed fiduciary standing within the reach of all.

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As a compliance reminder, whether a ranking is from Barron’s or any other organization, RIAs must be extremely careful when advertising those ratings on their website or in marketing materials. There are SEC no-action letters that recommend what types of disclosures should accompany rankings referred to in RIA advertisements.

Don’t get me wrong. I have no beef with Barron’s rankings. My only concern is whether RIAs disclose in advertisements how the rating was formulated.

If you receive recognition from Barron’s or another organization, check with your chief compliance officer before advertising it. Don’t ask me, because the only recognition I’ve ever received is a coffee cup that says, “World’s Dullest Compliance Guy.”