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
Stephen Winks
Andrew,
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.
SCW
Roger
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
Roger,
The counterpoint is appreciated.
Brooke
Stephen Winks
Roger,
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.
SCW
Related Moves
After recruitment of minorities and women gets CEO-level attention at Raymond James, a program gets a dynamic leader
With ratios stuck in the teens, CEO Paul Reilly gives chief marketing officer at subsidiary Carillon Tower Advisers, Renee Baker, her shot at mission impossible -- getting Advisor Inclusion Networks to live up to its Orwellian name
August 24, 2019 at 4:25 AM
Last year's RIA chief departs Raymond James after ship sails without her at helm of RIA unit, leaving her anchored to COO role
Maria Daley took the reins after Bill Van Law's unexpected departure, but Greg Bruce came on in March to lead RIA Unit, a job she held on interim basis
June 6, 2019 at 2:16 AM
Raymond James finally names new RIA chief and, yes, he is a Schwab veteran
The St. Petersburg, Fla. broker-dealer parted ways with Bill Van Law -- a Merrill Lynch veteran -- a year ago; now it has a real RIA veteran in Greg Bruce
March 4, 2019 at 11:54 PM
Raymond James promotes yet another woman to a powerful position -- this time an alum of Duke, Columbia by way of Goldman Sachs -- to head the very LPL-intensive Northeast corridor
Jodi Perry puts Shannon Reid in charge of the wealth-intensive Maryland-to-Maine corridor
December 3, 2018 at 8:28 PM
Raymond James Financial Inc.
Asset Custodian
Top Executive: Bill Van Law
Gemini Fund Services, LLC
Financial Planning Software
Top Executive: Andrew Rogers
