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Why many RIAs should start a mutual fund, considering the limitations of SMAs

A little daunting, sure, but advisors - especially ones geared to serving the mass affluent - will find the extra effort worth it

Author Guest Columnist Andrew Rogers October 6, 2011 at 2:36 PM
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Andrew Rogers: A robust sales function is also crucial to an advisor's successful fund launch.

Andrew Rogers


Eric Brown

Stephen Winks

Stephen Winks

October 7, 2011 — 3:28 PM


If brokers are selling a singular investment product, your suggestion would work just fine. But what about client holdings outside of the proprietary mutual fund you suggest which must be considered if continuous, comprehensive counsel required for fiduciary standing is to be provided. Wouldn’t it be a conflict of interest for an adviser to presume that his product was suitable regardless of facts and circumstances.




September 26, 2013 — 2:38 PM

Our firm looked into it and I have to respectfully disagree with this article. A small fund on the “open-architecture-platforms” discussed will erode the margins of running a fund. A fund can expect to pay around 40bsp to large bd’s or custodians just to be available on their platform. It will also cost way more than $50-60k to get a fund up and running. Cost of launching a single fund will run 150 – 200k per fund. If you have 4 strategies it adds up quickly. One would be better off setting up their strategy in a UMA on a TAMP like platform.

Brooke Southall

Brooke Southall

September 26, 2013 — 4:02 PM


The counterpoint is appreciated.


Stephen Winks

Stephen Winks

September 26, 2013 — 6:36 PM


You are absolutely correct on the fact that it is economically unviable for advisors to create their own mutual funds. First the mutual fund structure is simply the perpetuation of a high cost inflexible approach for a singular investment mandate. Second, there are far less costly approaches to portfolio construction that facilitate the management of a high degree of portfolio detail required for individualized advice and fiduciary standing. Third, there is great need for advisors to control their value proposition, cost structure, margins and professional standing that can not be addressed by proprietary advisor managed funds.

Mutual funds are just familiar, that is why they would be considered. Less familiar real time buy sell/research tied to more modern approaches to portfolio construction facilitate a superior value proposition, lower risk, lower cost, professional standing, better compensation—not possible in a mutual fund which can not be client specific.


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Mentioned in this article:

Raymond James Financial Inc.
Asset Custodian
Top Executive: Bill Van Law

Gemini Fund Services, LLC
Financial Planning Software
Top Executive: Andrew Rogers

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