The Adversarial Broker/RIA Relationship

Earlier this week I was asked what we do at Integrated Advisor Solutions. Of course my first thought was, “Go visit our website.” Instead, I proceeded to explain how our mission is to provide technologically advanced solutions common to the RIA business model that enable our clients to compete on a level playing field against very large, even multinational, financial services firms. And these solutions are derived primarily from the technology, operations, and marketing elements present within our clients’ firms.

So what does our mission statement have to do with brokers and investment advisors? Twenty years ago, full service brokers were viewed largely as referral sources for investment advisors. There never existed an enforceable fiduciary duty between a client and a broker, so most brokers were more than willing to permit that duty to exist between a third party advisor and the client as long as the client’s assets remained parked at the B/D for the sake of deriving revenue via trading commissions. It didn’t take long for discount brokerage firms like Charles Schwab, Fidelity, Pershing, and TD Ameritrade to construct their institutional custodian platforms that resulted in the mass exodus of assets away from full service broker/dealers as RIAs began consolidating accounts.

A second threat to the longtail revenue model of full service brokerage firms is the breakaway broker who decides to leave the firm with his/her book of business in tow, only to deposit those assets at an alternative custodian. In an attempt to retain these at-risk assets, most brokerage firms have established separate advisory arms whereby brokers interested in the registered investment advisory business model can custody those assets under the same umbrella as the brokerage firm, yet operate under a fee-based vs. commission-based revenue model.

Consequently, advisory firms now find themselves competing squarely with very large brokerage firms, even on the basis of fiduciary duty, as brokerage firms would rather refer those clients seeking a fiduciary relationship to an in house advisory business unit rather than an independent advisor who would be free to move assets to an alternative custodian.

The single element on which we pride ourselves is the fact that we bring highly technologically advanced solutions to RIAs enabling our clients to compete head-to-head with these very large firms in the areas of technology, operations, and marketing, and look very good in their clients’ eyes while doing it. We do this by maximizing the operating efficiency of installed software systems, bringing cutting edge methods of client contact designed to strengthen the client-RIA relationship, and creating and distributing media-based assets designed to re-engage clients with the firm’s intellectual capital.

If you would like to discuss how our solutions can help grow your firm by competing equitably on a level playing field with significantly larger financial services firms, simply contact us today!