RIAs becoming more like brokerages


Investment News ran a story yesterday showing how, as the fee model and the fiduciary discussion gradually permeate the world of financial services, RIAs are losing their competitive advantage. The story ended with a great self-refuting statement from Linda Leitz, incoming chairwoman of the National Association of Personal Financial Advisors: the industry isn’t becoming more similar; it’s becoming harder to tell firms apart.” Linda, if the players are becoming harder to tell apart, they ARE becoming increasingly similar.

In fact, they are becoming more and more similar even in the ways Leitz meant that they were not. If a firm (brokerage or not) provides investment advice (like managing assets) for a fee or hold themselves out to the public as providing financial planning, the Investment Advisers Act of 1940 requires registration. And the fiduciary standard applies, at least for that portion of the relationship with the client.

And not only are the national brokerages managing more assets for fees rather than commissions – they are doing more financial planning. The article makes specific reference to the planning platform at Raymond James & Associates. I had breakfast yesterday with a close friend who is a Certified Financial Planner with some pretty serious technical chops and is also a broker at Merrill Lynch. Included in her response to my query of “what’s new?” was her positive review of Merrill’s financial planning software and their national emphasis on doing more planning work for clients.

Now, clearly RIAs are not moving in the direction of brokerage firms, it is rather the other way around. My point is that since clients increasingly cannot tell the two apart, it doesn’t really matter who’s moving in which direction.

More to the point – what makes an RIA an RIA is not what attract clients. I have done a lot of client advisory boards for firms in which I ask about what is most important about the firm in choosing to work with them. No one yet has responded “because they are held to the legal requirement to put my interest above all others.” That part is assumed. In fact, in one recent board meeting we listed all the things clients said were important about an ideal financial advisor. The list included independence, objectivity, customized advice, and about every other way a layperson might describe the implications of the fiduciary standard. Then we asked “how well does this advisor embody those characteristics?” One participant replied “aren’t ALL advisors like that?” And everyone else agreed that was their impression.

Is it true? Of course not. But clients believe it’s true for the most part. Therefore, it is of little marketing value.

Your competitive advantage is not about your type of firm versus brokerages or other types of firms. Your competitive advantage needs to be why your ideal (target) client should choose you over other advisors. What expertise do you have, what experience can you provide, that has special value for the clients you want to win over the most? If you can answer that in a compelling way you will overcome any competitive threat – whether it be the brokerages or other independent fee-based advisors.


  1. AlanAugust 1, 2013

    Interesting article, but the bashing on Linda was unnecessary. You missed her point, which is that brokers like to say they are providing RIA-like services (and therefore look similar) but they aren't providing those services in the same way as RIA's. While RIA's are working in a fiduciary manner for their clients, brokers are simply using financial plans as a way to sell more investment & insurance products.

    Firms are not becoming more similar, but the profession is becoming even more convoluted, making it harder for consumers to tell firms apart.

  2. Bruce PetersAugust 2, 2013

    Thanks for this. If someone was actually going to recommend an Advisor how would they know
    a good fit?

  3. Susan Weiner, CFAAugust 5, 2013

    This sentence from your post says it all: Your competitive advantage needs to be why your ideal (target) client should choose you over other advisors.

  4. Stephen WershingAugust 5, 2013


    Thanks for the comment. I don't mean to bash Linda – and I disagree with you on the same point. The brokerage world is not some fixed thing that has not changed over time. Sure, there are salespeople more concerned about making a commission above most other things. Still, the majority of wirehouse reps I know are managing assets for a fee and their investment management services are indistinguishable from most RIAs I know. It is not as clear cut as you would like to believe. The two sides really ARE getting more similar.

    I appreciate your contrinuting a comment!


  5. Stephen WershingAugust 5, 2013


    Well, this is the secret of advisor marketing. If an advisor is differentiated from other advisors, their special skill or offer is what they would talk about and promote. If an advisor does that well, it will be clear who should go to them. And anyone who knows that advisor will know to recommend them when they hear a friend express a need for it.


  6. Stephen WershingAugust 5, 2013

    Thanks, Susan!


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