Being an RIA who custodies at Schwab has always been a crapshoot. Their custody services are great but RIAs must feel like they’re back in middle school and Schwab is the popular girl. She asks you to be her boyfriend on the way to first period, breaks up with you before recess, only to get back together after lunch.

In a prior post, I talked about Schwab chucking advisors from their referral program. But any advisor lucky enough to still be in the program is in for some good news, Schwab just unloaded US Trust Corp to Bank of America for $3 billion. Why is this good? It gives Schwab only one remaining channel for high net worth clients—independent RIAs.

The article says Schwab traded their trust capability for a formidable “war chest” and the price paid by Bank of America was “shocking”. It implies the deal was driven more from Schwab being enamored by the $3 billion than any altruism toward RIAs.

Regardless of the reason for the sale, Schwab reps are sure to benefit:

[RIAs], which have a combined $470 billion under custody with Schwab Institutional, are poised to capture the lion’s share of assets from families that come to Schwab looking for full wealth management capabilities…

“Schwab advisers can expect to reap the referrals that flowed to U.S. Trust in past years. This amounted to about $1 billion per year for a total of $6 billion as of June 30.”

Elizabeth O’Brien reports in Financial Planning Magazine that Pershing has launched their Net Exchange Investor site. This is a client-facing site that allows financial advisors to give their clients online access to their accounts. Advisors control the parts of the site their client can see and there is no trading capability—that is still left to the advisor. If you use Pershing as your broker/dealer I recommend that you take the tour and see if you like it.

The site seems like a good value-added service from Pershing and will probably have a decent adoption rate. My problem with these broker/dealer client-facing sites is that they tend to get the client involved with the broker/dealer directly. This creates a large obstacle if the financial advisor wants some portability.

David Drucker at Morningstar talks about the perpetual dream of all-in-one software. This theoretical software would do everything for an advisor—portfolio management, contact management, trading and financial planning. It’s an admirable goal but he hits the fundamental problem on the head: “jack-of-all-trades/master-of-none”. The article goes on to talk about the numerous integration options available between the current best-of-breed software packages.

I’m chuckling because Morningstar is attempting this themselves with Morningstar Advisor Workstation. They’ve been having the problems he describes. On the Financial Planning newsgroups, people have said the following:

“The software has many unsolvable problems apparently. We are currently paying $425 per month for something that doesn’t work. I feel like we are their troubleshooters.”

“The biggest issue for me is the data load, which seems unreasonably manual (and no direct feeds are available).”

“The portfolio accounting portion of this suite should be considered a beta version.”

Morningstar should be commended for having reporters independent enough to write critical articles. And I would further encourage them to keep making forward progress toward a one-platform solution for the industry. It’s a long hard road but, as Drucker correctly states, at the end of that road is the Holy Grail of advisor software.

Don’t give up!

In another sign that our industry is trying to clean up its image the Massachusetts Security Division is trying to clarify all the designations that are used by Brokers, Investment Advisors and Financial Planners. In this article Robert F. Keane writes about the efforts of the state of Massachusetts to try and clean this problem up. The FPA jumped on board writing a letter to offer some possible criteria for selection of designations.

You can read the background of this action here. I am glad these types of actions are happening, but it saddens me that it’s necessary at all. I guess that it’s normal that whenever there is money involved there will be people out there trying to deceive and steal.

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All financial planning is faith-based. Faith that past performance will be at least somewhat indicative of future returns.

The National Christian Financial Advisors take it to a new level. There’s a short blurb in Investment News that discusses their approach to financial planning:

“We advise clients from a Christ-centered standpoint and put together a financial plan for them,” said Hakeem J. Webb, senior investment adviser at NCFA.

…[Hakeem] likened the importance of casting bread upon the waters - which is a symbol of money - to diversifying money into many investment buckets.

Harry Markowitz—brilliant economist or biblical plagarist? I guess modern portfolio theory isn’t so modern after all.

Two weeks after the midterm elections, predictions from our industry’s reporters and pundits are starting to trickle in.

Jonathan “Capitalist Pig” Hoenig at SmartMoney.com says the “anticapitalist, welfare state [Democrat Congress]” will cause a decline in the dollar. I was sad to see Charles Paikart at Investment News verifying that social security reform is on hold for the next two years. Financial Advisor Magazine sees the Democrats focusing more on corporate tax reform, starting by eliminating abusive corporate tax shelters.

Financial Advisor Magazine goes on to predict no change to the estate tax, meaning big estate tax bills starting in 2011. They suggest getting much more aggressive with your clients’ estate planning and say Congress won’t drastically change ordinary income tax rates or the alternative minimum tax over the next two years.

Bill Carlino, Editor-in-Chief of Accounting Today agrees that [new head of House Ways and Means] Rangel won’t make any major revisions to the tax code. Sara Hansard at Investment News also predicts bureaucratic gridlock, with no major changes. In a second article, she goes one step further forecasting “all out war” between Bush and Congress. As I mentioned in a prior post, Schwab’s crystal ball, in the form of chief investment officer Liz Ann Saunders, shows no major market movements, except possibly at the sector level.

Note: One of our most relevant publications, Financial Planning Magazine is silent on the subject.

The editorial in the current Financial Planning Magazine just announced AdvisorMax, a pay site where advisors can get advice and attend seminars. You can join for a year for $299 which includes “six live Coaching Sessions a $234 value, free.” (they offer a 6 week free trial)

Interesting concept.

It seems to fill a need—there’s nothing else out there claiming to be the “financial advisor’s advisor.” They offer coaching sessions, articles and discussion forums. In fact, they seem to offer lots of things the main Financial Planning site offers for free.

Their message boards are just getting started but the moderators seem to be knowledgeable. Several of the forum moderators are from this NextGen group I keep hearing about. If I was a young planner without a knowledgeable mentor, I would definitely consider subscribing.

Some of the best things in life are free.

Did you know some of the best industry magazines are free? All of the major magazines are available online for free. But it’s much easier to read the print copy, and some of them *cough*Financial Planning*cough* don’t update their website with the new articles for weeks. Plus they look pretty snappy lying around the office when your clients drop by.

• Investment Advisor Magazine - Free.
• Financial Advisor Magazine - Free.
• Wall Street & Technology - Free.
• Traders Magazine - Free.

The SEC announced that the EDGAR search tool I talked about here is online. The only part that’s available is the Full Text Search but it’s a start.

It looks like they are moving along with the project as scheduled. The only part that’s online now is the full text search but if you click on Advanced you can narrow the search pretty quick.

Many smaller firms don’t have the resources to properly secure their IT Infrastructure. Tim Clark writes about the efforts some larger firms take to ensure proper data security.

Some years ago I was at a firm where a disgruntled employee deleted many financial plans and the CRM database before he left. Fortunately, I had a backup strategy and was able to recover the files. However, it did bring to light a serious issue. Did he really need access to those files? Who really needed access to what?

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