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Frederick Van Den Abbeel

Frederick Van Den Abbeel

September 17, 2009 — 10:02 AM

Brooke,

Thank – You for a wonderful article. As the Executive Vice – President of an RIA Custodian-Brokerage firm myself (Trade-PMR, Inc.) — I echo your findings. In particular, one of the reasons wirehouse firms help Advisors form “team practices” is the impact of joining such teams have on the broker protocol. These team practices typically have agreements which take precedent over the protocol according to a study I read produced by Pershing, LLC.

I believe more Advisors affiliated with the LPL’s of the world will continue to ponder becoming truly independent. I call it the “Broker-Dealer” phenomenon which I explain as the following: imagine Brooke if you were running your own B/D firm and had, for example, 5 Registered Representatives whom you know quite well in terms of their business practices, clientele, etc. As the Principal, you can probably allow for a lot of flexibility for these Reg Reps to structure and run their practice. Now, imagine you are the principal of a B/D firm that has 1,500 Reps. Can you offer the same level of flexibility? As B/D’s get larger, they tend to build their systems on the 'lowest common denominator’ compliance. In other words, build the B/D policies and “house rules” on the worst among us which has a very unfortunate effect on the good and ethical rep affiliated with the same firm. This is most likely one of the largest factors why a Reg Rep goes RIA. He/She is tired being lumped in with the bad apples and being subjected to non-sensical broker-dealer “house rules” which are impacting his/her business.

Brooke Southall

Brooke Southall

September 17, 2009 — 3:06 PM

Fred,

Thanks for expounding on these points. It would be interesting to know more about how these teams form, especially if its true that they span multi-offices. I’d be interested to know which Pershing study addresses your point.

Your primer on the difference between an IBD and a non-IBD is also interesting. The lines are often blurred and your description makes it possible to get an intuitive sense of where they diverge.

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