Wednesday, June 29 2022


“To a large extent, [broker-dealers] are only peddlers of forgivable tickets. That’s their main selling point when talking to advisors – which we’ll give you if you move, ”says recruiter Jon Henschen, in an interview with ThinkAdvisor.

“Cash up front should be a spice, not a main course,” says founder of Henschen & Associates. “Under no circumstances should this be a primary reason for moving. “

Henschen also has a strong opinion on comics which mark up the fees of external fund managers, which are paid by the client. Advisors are generally unaware of “the manipulation,” he says.

“Some companies are getting downright abusive in their markups. Brokers certainly make things opaque and hidden, ”he notes.

Henschen opened his practice in 2001 and today focuses more and more on helping FAs become RIAs, either by starting their own councils or joining existing ones.

The RIA channel is the fastest growing, according to Henschen. The channels that lose advisers the fastest are communications agencies, captive insurance companies and banks, he says.

In the interview, the recruiter discusses what he expects to be “a fast growing part of the industry”: larger RIAs who take freelancers under their umbrella but let them run their practices independently. .

Based in Minnesota near St. Paul, Henschen started in the 1990s as a broker with Merrill Lynch and Prudential Securities. He later became a wholesaler of mutual funds and annuities. In 1998, he recruited for National Planning, a broker. ThinkAdvisor recently interviewed Henschen by phone.

A “point of frustration,” he says, is that when speaking with certified financial planners, some seem to despise the fiduciary standard, which they must now adhere to for plans and investments. “They make comments like, ‘Yeah, the fiduciary standard – what is it? “, He said. But others are “very careful to join”.

Here are the highlights of our conversation:

THINKADVISOR: How strong is the trend for independent advisers to adopt RIA?

JON HENSCHEN: The fastest growing channel is the RIA channel. Independent brokers come in second.

The channels that lose the most advisers are [in descending order] wire houses, captive insurance brokers and then the banks.

When you are contacted by advisors, do many want to become RIAs?

Often times, they are unaware that there are RIAs they can join, maintain their independence, and significantly reduce costs for clients.

Why are you focusing on the RIA channel?

Because RIAs can save clients huge amounts of money since they are [required to adhere to] the fiduciary standard on investments.

You can either go to a broker who pays you a big upfront check – that’s [actually] will be paid by your customers – [or go RIA].

It’s a question of: am I doing what is best for the customer, or am I doing what is best for me?

Unfortunately, it seems that [many] financial planners are more concerned with what is in their best interests, not necessarily their clients. ‘

What is currently standing out in the RIA space?

One area of ​​the RIA market that I think is going to be a part of the fast growing sector is the larger RIAs that use independent advisers who can be subject to their RIA but still operate independently. .

For example, you could be at a broker and net, say 65% ​​-75%, then join a RIA and, maybe, 88% -90% net. Thus, advisers could earn a little more and significantly reduce their overhead costs.

Opening your own RIA or joining an external RIA is attractive because it offers more choice and eliminates many layers of costs for brokers. It also eliminates the conflict of interest.

When you go to an RIA that is not affiliated with a broker, you move away from [many] fees and get much lower administrative fees on advisory assets. It is therefore a much less expensive, transparent and favorable environment for fiduciaries.

Why else do you think the RIA channel will grow faster than the independent broker channel?

This is because of two events, both of which motivated me to deepen the RIA channel. The first was when CFPs were required to adhere to a fiduciary standard not only on their financial plans, but on their investments.

Enforcement of this started in June 2020, although I have not heard of any disciplinary action [thus far]. The other event took place when external custodians like Schwab, TD Ameritrade and Fidelity IWS [Institutional Wealth Services] stopped charging ticketing fees on stocks and ETFs.

This was another big problem as it made the closing accounts obsolete.

What are the main motivations for advisers to want to change companies?

There are a lot of reasons, like better cultivation and access to external caretakers. In addition, there are trigger events, such as a change in regulation such as the implementation of a new compliance; Reg BI, for example.

Some companies are heavy and do a lot of [compliance] changes that turn off the reps, and you can see a flow. Other trigger events are the sale of brokers and mergers, which can [set off] a flurry of brokerage changes.

What was the most recent merger trigger?

Probably when Voya got absorbed by Cetera [in June]. The reps thought, “Hey, our business is being sold. Do we go with Cetera and take the retention bonus? Or do we look around and go where we want to go? “


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