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Becoming an RIA, With Help From Wells Fargo

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This past September, Sarah Berry packed up her practice at Wells Fargo Advisors, where, throughout two rapid acquisitions she’d been a financial advisor for more than three decades, and opened an RIA two blocks away. In an interview, she tells ThinkAdvisor how Wells Fargo facilitated her move.

The bank’s wealth unit has lost 1,118 advisors, as of Dec. 30, 2018, precipitated mainly by Wells’ fake-account scandal that hit the headlines in fall 2016.

But that debacle didn’t prompt Berry and partner Michael Machnowski to leave, even though client referrals had dwindled to a precious few; and in some situations, they “got painted with the headline news,” managing partner Berry says. That, despite clients’ awareness that WFA wasn’t part of the fraud issue.

The Berry Group, in Worcester, Massachusetts, simply left because they yearned to be independent.

The perfect opportunity arrived in January 2019 when Wells launched an RIA channel with a program to attract add-on RIAs as well as existing Wells Fargo advisors.

The Berry Group, with about $580 million in assets under management, applied and became one of the first dozen practices and the only one in New England to be selected, according to Berry.

Under the program, Wells Fargo’s Clearing Services, known as First Clearing, provides custody for the RIAs, and broker-dealer TradePMR, an outside firm, supplies back-office support.

About 97% of Berry’s clients moved with her group of four, which includes three FAs. Clientele is mostly high-net-worth individuals, plus some endowments for nonprofits and a few pension plans.

What Berry was looking for was a work environment more in the model of A.G. Edwards, where she’d begun her career in 1978. Originally family-owned, it was, for one, far less bureaucratic than Wells. But in 2007, Wachovia acquired Edwards, and the following year, Wells Fargo bought the merged firm.

At Edwards, Berry built her practice on 300 seminars and without a single cold call. She stayed at the firm as an FA and manager, throughout both disruptive acquisitions and looked for the silver lining.

Then came Wells’ RIA offer, too well timed to pass up.

ThinkAdvisor recently interviewed Berry, who was on the phone from her office in Worcester. The Bennington College graduate is on a mission to teach clients to be financially competent. That calling may have been inspired by her teacher dad: When she was 10 years old, he sat her down and taught her about the stock market.

Here are highlights of our interview:

THINKADVISOR: What appealed to you about becoming an RIA?

SARAH BERRY: Going independent. It’s more like the model of A.G. Edwards that we had when my partner Michael Machnowski and I were there. The RIA gives us flexibility on how to plan our future and allows us to attract people into our practice that we might not have been able to at Wells Fargo.

Why wouldn’t you?

We’re located near Boston, where there’s a huge amount of RIAs. When we were feeling out this idea earlier, some people we talked to weren’t interested in working for Wells Fargo because of how the bank side had dealt with issues — which we all know a great deal about.

What impact did the Wells Fargo account-fraud scandal, to which you allude, have on your practice?

Though the client relationships were with us, the ethics of that whole situation certainly colored some people’s [thinking]: A couple of nonprofit endowments had a lot of questions for us. None of our clients left, however. But we think that referrals pretty much stopped because of [the ongoing scandal].

What aspect of that made you decide to leave and start your own RIA?

What the bank went through didn’t affect our decision. When Wells Fargo Advisors [started a new program and] said, “If you want to be an RIA, we’ll help you,” we were handed this opportunity on a plate: We could be an RIA, own our own practice and still continue to use First Clearing [aka Well Fargo Clearing Services] as our custodian. It would be as uneventful and undisruptive as it could possibly be for our clients.

How did you get into the program?

Wells was very selective about who they let apply. We were one of the first 12 practices they selected to do this and the only one in New England.

Do you have any connection with Wells Fargo Advisors now?

We have nothing to do with Wells Fargo anymore, but we do have the benefit of accessing all their research from Wells Fargo [Investment] Institute, which I still have a great deal of confidence in.

What percentage of clients went with you?

About 97%. They said, “Where you go, that’s where we’re going.” A couple said, “Now we can send you some referrals,” or “We didn’t even want to say that we dealt with Wells Fargo” [as clients], even though they clearly understood that Wells Fargo Advisors didn’t have the same issues as the bank. So, in some situations, we got painted with the headline news.

What’s the biggest challenge facing financial advisors today?

Whether you’re on the other side that I just left or [independent], you have to be a person and a personality in the client’s life and not provide cookie-cutter answers.

What does that involve?

You have to be socially well mannered and well read. We talk to clients about music and art and the things they care about. If you can’t enter their world and what they think about, you don’t connect with them. We spend probably 80% of our time in client meetings talking about things that have nothing to do with the stock market.

Like what?

A client might have a sick parent or kid that needs financial help, or they may want to buy a second home. It’s helping them sort out what they’re capable of doing [financially]. It’s being willing to tell someone, “You’re spending too much. That isn’t a good decision.” So it’s a combination of being practical about finance and being very psychological, too.

Please elaborate on the psychological part.

There’s a kind of wisdom you have to bring to the table. You have to show up in your clients’ lives in a way that isn’t about fees or transactions but is about genuine caring.

During difficult times, what’s a key trait that’s helped you cope?

I’m pretty unflappable. I don’t get rattled very easily. My father told me, “You can do anything you want to.” I’m the oldest of six and grew up to be very self-sufficient. My father taught me how to fix the water boiler because my mother couldn’t do it.

How does being unflappable show up in your professional life?

When I was at A.G. Edwards and we were bought by Wachovia and then by Wells, we were being confronted with change. Some people can’t accept change and complain and worry. I don’t get undone by it. Change is inevitable. I try to look for the best parts of it. If it’s the corporate world that’s changing, I try to make sure I get to know management; or I communicate up the chain, not down the chain.

What are your diversions and hobbies?

I’m one of three selectmen [officials on local government board] on a [little] island off the coast of Massachusetts, where I have a small home. As a selectman, you’re making decisions for how the town runs: dredging the channel, getting new pipes for the water system. My only other hobby is cooking French food — and someday I hope to have more than one dog.

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