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Industry Spotlight > RIAs

A Bumpy Ride

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In the premiere article in his multipart Road to Independence series chronicling the steps that any advisor would need to take to go independent, Mike Patton discussed the pros and cons of becoming RIA only, affiliating with an independent broker/dealer, or being dually registered for different business purposes. In his first blog posting, Mike relates how that decision is playing out in the real world.–Ed.

Well, talk about “bumps in the road.” In starting my new firm, I had decided to go with a particular broker/dealer that I was with several years prior as an OSJ. I spoke with the initial contact person who after demonstrating their new technology and answering all my questions directed me to fill out their 44-page online questionnaire, which I did. I sent it to them via an overnight service and was then connected with a transition specialist. I spoke to this person a few times and then he said he’d send it up to compliance for review. He said everything looked good and didn’t see any snags. He even mailed me a new rep kit. At this point it had been a little over three weeks since my decision to join them. Plenty of time, right? Well, not necessarily so. You see, even though I told my initial contact and the transition specialist that all the financial planners in our firm were de-licensed as of July 2006 (I lost my series 7, 24, 63, and 65), including me, neither indicated that it would cause a problem. Not even a pause. Everything was proceeding well, and then BAM! The Friday before my last day at my current employer, I was told by a different individual with the broker/dealer that there was no way they would be able to start me out as an OSJ since I was de-licensed so long ago. Eight months! Didn’t seem that long ago to me. It’s not as if I left the business. I was very involved and working as a financial planner. Was this a matter of law or an internal company policy? Not really sure. Does anyone out there know the answer?

Anyway, if I choose to remain with them I will have to come under their home office supervision and take a reduced payout. That’s a hard pill to swallow. I am currently waiting for their compliance department to go through the approval process and I’m also not sure if I’ll say “I do.” This has caused me to reconsider the RIA channel. With an RIA there would be no B/D compliance, a higher payout (100%), and I would have more control over my business.

I filed my LLC papers that same Friday and should have my RIA (for financial planning) established with the state by the time you read this or shortly thereafter. Under this RIA I will only do fee-based financial planning. If I do choose the RIA channel for the investments, I’ll place everything under this RIA. Again, if I stay on the B/D side, my RIA will only do the planning.

I have a few clients that are ready to hire me and a good referral source, an attorney who works in the estate and tax arena. He is ready to make his first referral to me as soon as I’m ready.

So other than the fact I have no place to custody assets as this time, I do believe everything will work out for the good. I’ll do the financial planning that I love to do and work on finding a quality platform to hold my client’s assets. And if it’s not with this particular B/D, then I’ll assume it just wasn’t meant to be.


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