MARINE ON ST. CROIX, Minn.,
Sept. 28, 2021 /PRNewswire-PRWeb/
-- In the September 21, 2021
article in ThinkAdvisor "How Proprietary Advisory Platforms
Conflict With Fiduciary Standards"
Henschen addresses how broker-dealer corporate RIAs have jumped
on the proprietary advisory platform bandwagon at a rapid clip over
the last five years. Having been approached by broker-dealers
wanting assistance in recruiting advisors, with a focus on bringing
advisors to them, not only with a large percentage of advisory
assets but also assets that will specifically go into their
proprietary advisory platform.
"It is uncomfortably common to hear advisors' feedback on
broker-dealer management telling them directly that they should put
their advisory assets into their proprietary advisory platforms.
But it is the more subtle ways the platforms are pushed that remind
me of the days when insurance broker-dealers manipulated sales into
their insurance products. Here are just a few of the tactics we see
employed:
- Company websites giving preferential exposure to proprietary
advisory platforms.
- Offices of supervisory jurisdiction receiving bonuses based on
proprietary advisory client assets from the advisors they
supervise.
- Advisors consulting with advisory departments for guidance
being steered to use their proprietary advisory platforms.
- Offering incentives to direct more assets into proprietary
advisory platforms, such as free services when you hit a certain
asset threshold.
As effective as these tactics are at directing assets to their
best profit centers, keeping advisors in the dark is even more
effective."
Translating this to a broker-dealer RIA level, we've been active
over the last year with a broker-dealer specialized in advisors
with tax practices. Many of these advisors opt for the
broker-dealer's proprietary advisory platform that manages models
using mutual funds and ETFs at a cost between 20 and 30 basis
points.
"They also use NFS for clearing, but access to Fidelity IWS is
not made available. Fidelity's FMAX offering gives advisors an
option to go from 20-30 basis points to zero, and you can opt for a
broker-dealer that offers billing and performance reporting for
around $50-$75 per account annually (no basis points on
assets). The advisor will initially need to set up the models per
the Fidelity model structure, but once in place, changes can be
made automatically or customized by account if they so choose."
Some of the best ways to battle fee compression by lowering
costs to clients, leaving the advisor with less pressure to lower
their management fee. How does such cost savings translate with the
broker-dealer RIAs that have proprietary advisory platforms? It
doesn't.
Jon Henschen is founder of
Henschen & Associates, an independent broker-dealer recruiting
firm located in Marine on St. Croix,
Minnesota. With more than 20 years of industry experience,
Jon is a staunch advocate for independent financial advisors, and
is widely sought after by both reps and broker dealers for his
expertise and advice on independent broker dealer topics. He is
frequently published and quoted in a variety of industry sources,
including WealthManagement.com, ThinkAdvisor, Investment Advisor
Magazine, Wealth Management Magazine, Financial Advisor IQ,
Financial Advisor Magazine, Investment News and others.
Media Contact
Cristi Barkley, Henschen &
Associates, (888) 820-8107, jon@henschenassoc.com
SOURCE Henschen & Associates