Financial Strategy Network, a Chicago-based financial planning firm with $550 million in assets, said Thursday that it had become an RIA firm custodying its assets with Pershing Advisor Solutions and was no longer affiliated with Raymond James Financial Services.
"This was a difficult decision because Raymond James has been a terrific partner and supporter of us during our early growth phase," said Jim Weil, one of the firm's four partners, in an interview with AdvisorOne.
FSN includes six advisors and about 20 staff members and was part of RJFS, the independent channel of Raymond James led by Dick Averitt, for the past 12 years. Previously, it was a Cigna affiliate. Weil’s three partners are Steve Merdinger, Craig Richart and Jeff Toner.
“We certainly would have preferred to have the FSN team remain affiliated with RJFS," said Jim Fulp, managing director of the Raymond James's independent-contractor division, in a statement. "We continue to have a significant number of independent branch managers who own and operate through their own RIA company under our Investment Advisors Division."
According to Weil, broker-dealers are “better geared to individual producers instead of enterprises like what we created … so we had to make this change as a way to serve our clients more effectively, run our business more efficiently and build enterprise value."
FSN specializes in providing financial planning and related advice to about 500 families that include “self-made individuals” whose net worth ranges between $2 million and $20 million.
Weil (left) says the firm’s business evolved over time and is now 95%, comprised of fee-based work. “Thus, it made good business sense to do a survey related to the strategic differences between broker-dealers and pure RIAs in terms of the platform or technology and the economics,” he explained. “Things have evolved, and we are going to be better on a pure RIA platform. It’s just a better fit.”
The back-office technology that FSN is embracing at Pershing, he says is very “robust.” (The firm compared it to systems at Schwab and Ameritrade.) “We did some intense analysis,” Weil said.
“One of our goals is to block-trade assets and rebalance strategies across households, not just accounts, and we need the software that can do that,” the advisor explained. “We had a good relationship with Raymond James for a long time,” said Weil, “and feel we are making a change for the right reasons.”
Wiel and his colleagues at FSN "came to the determination that there were economic and other business reasons which made it attractive for them to move to an independent account custodian with highly competitive pricing of both trading and other services for their clients," explained Fulp of RJFS. "While we regret their departure, if they should they ever want to once more establish a relationship with Raymond James, we would warmly welcome them back.”
As for the transition, it’s very involved, Weil says. Getting the client forms signed and accounts transferred to a new platform is “very labor intensive and takes a phenomenal amount of time,” he explained. “And Raymond James has been supportive and helpful. Without their help, it would have been more difficult, so we appreciate that support.”
FSN's transition process should be complete by the end of the month, the advisor explained. “We told our clients that we do surveys periodically to make sure we have the best support structure to meet their needs and improve our service offerings. And over 99% of clients agreed to transfer.”
Market volatility hasn’t hurt this shift, Weil says. “We can’t control the timing of the market, and our experience so far has been that it hasn’t been a factor on these transactions,” he noted.
FSN’s office in Chicago’s financial district is also unaffected by the transition. “We are not changing from scratch, like a wirehouse group would have to do. We’re just changing the custodial relationship and back bone, so it’s easy for our clients and our team to stay in the same place,” he explained.
As for whether or not other advisors should make a switch like FSN’s, “It depends on what type of business you have,” Weil said. “If you want to create an enterprise that will create value and last behind you, this is the trend of future.”
On the other hand, if an advisor or team is focused on maintaining clients, generating a certain income level and keeping things simple, “This kind of change is not for you,” he stressed. “Just because we are doing this by no means makes it the best or only way to do things. It’s one way,” said Weil.
FSN expects to expand its asset-management operations considerably, according to the advisor, and create “greater efficiencies.” Weil added, “When you move from the broker-dealer world to the custodial world, it does improve the economics for FSN.”