Straight talk from a community bank breakaway

Elizabeth’s note: RIABiz has been covering what seems an increasing number of breakaways from banks. Freelancer Steve Garmhausen gets right to some of the critical questions (how much it costs and how many clients come along) in this breakaway profile of Rob Copeland, who is still in the throes of establishing his RIA after breakaway in March. Copeland was an investment officer with the brokerage unit of First Federal Savings Bank, a community bank based in Clarksville, Tenn.

Name: Rob Copeland

Location: 308 S. 2nd St., Clarksville, Tenn.

Years in business: Broker for 11 years, advisor for five years

Why did you decide to break away?

After 2008 and the near collapse of the financial markets, I felt that my clients and their money would be better served on a RIA platform. It was a difficult time for me to go back to my clients and tell them, one, your account has lost significant value; two, the insurance company that you have been paying to protect your income and/or principal might not be able to do so, and three, the state guarantee association will not cover your riders on your policy if the insurance company fails. That’s when I knew I needed to do something different, and find a more flexible platform where I could better make my clients money in good markets and protect their money in bad markets.

How many clients followed you to your new business?

So far, 34% of assets have come over, about $15 million. Truthfully, I didn’t want all my clients back. Part of the issue with working inside a bank is that you have to take on everybody who has a loan or a checking or savings account in order to keep in the bank’s good graces. I didn’t want 1,100 accounts—I wanted under 200 so that my service level could increase.

Which asset custodian do you use and why?

Sterne Agee. They provide excellent software through TradePMR.

What’s different about your firm?

I work with a lot of widows and retirees in addition to doctors, lawyers and bankers. I communicate Wall Street to my clients in ways they can understand. And I get to really know them and understand their financial history; that takes time and patience—something that a lot of brokers don’t have.

Who are your biggest competitors, and why?

For widows, it’s the banks. That’s the first place they’ll go, and they work with what they’re used to, like CDs. For retirees, it’s usually the provider of their 401k plan, Fidelity, for example. For professional clients, I would generally say brokers, both independent and bank-based, such as Merrill Lynch, Raymond James, and LPL, are my biggest competitors.

What was the biggest obstacle you faced in breaking away?

The upfront costs. It wasn’t cheap, between the loss of income for a quarter and then the startup costs. For a 33 year old to come up with $50,000 or $100,000 pretty quickly—well, I didn’t have that just lying around. Luckily, I have a very supportive mom.

What is your primary strategy for winning new clients?

I network well, and I try to make sure my advocates understand what I do and how I’m better than the brokers in town. I point out to attorneys in my network the role of a fiduciary versus a suitability role. I explain that I’m the only RIA headquartered in Clarksville that directly manages client assets on a fee-in-lieu-of-commission basis.

What’s the biggest issue for the profession right now?

Education to create public awareness of the differences between RIAs and brokerages. As an industry, brokerages and RIAs have to rebuild their image after Bernie Madoff and all these rats have scurried from the ship. It takes a lot to regain the public’s trust.

What’s been the best day of your RIA career so far?

The Friday afternoon I received 10 calls from former clients who had found my number without me soliciting them.

Name a life lesson that has served you well as an RIA.

Never assume your client understands anything without explaining it to them. Even something as simple as inflation—explain it.

What the next big thing for investing?

Serving the underserved market, the people who can’t meet typical investment minimums. This means finding ways for RIAs to help this group meet their goals and objectives.