RIA for Fee Based Business?

[scagnt83]

One of the things I understand a 65 is for is to be compliant with securities law when rolling over some 401(k) money into an annuity. Is that right?

If so, since you probably wouldn't be rolling over the whole nest egg, the 65 allows for the rest of the 401(k) money to be put with a money manager, who charges a fee and you, the agent, can share in that fee. Am I right?

What about other securities the client might have? Can they be put with the RIA so he would have only one place, and one monthly statement? Or is that a no-no, because a 7 is needed to trade securities?

A 65 is to charge a Fee for giving financial advice, specifically advice about securities.

A 7 is needed if you want to be paid commissions on selling securities (or a 6 if all you do is funds).

If you just want to charge a flat fee, or a wrap fee, you can still make trades for your clients as a 65. You just cant be paid a commission for those trades.

Some IARs have a hybrid model where they are a 65 plus a 7 or 6. This lets them charge a planning fee plus be paid commissions.... imo this goes against the spirit of being a 65.

 

[DennisTheMennis]

I agree with DWPCL. For slightly more than you are paying now per month you could set up your own RIA.

For under $3k you can use RIA in a Box for the start up + get ongoing compliance support for 12 months. After that it is like $150/m for ongoing compliance support.

Then for an extra $100/m you could use MoneyGuidePro for planning software (it now includes account aggregation).
Then use TD/ScottTrade/Schwab as your Custodian/Trading Platform.

Then you will have 100% control of your future/business model.

Awesome! This is exact the information I was looking for, I hadn't heard of RIA in a Box but love the concept and I didn't know it could be that cheap...

I also will check into Scottrade and Folio. I have been looking to join an RIA and give up a split but recently said screw it, I have the knowledge and experience running institutional portfolios in the past so I can do this for smaller clients on my own. This mixed with EIAs is a great combination for everyone.

Thanks again gentlemen for your help!

----------

I have been in the BD world for many years but am switching to RIA, getting 65 soon. This is the way the industry is shifting in my opinion....

 

[scagnt83]

Awesome! This is exact the information I was looking for, I hadn't heard of RIA in a Box but love the concept and I didn't know it could be that cheap...

I also will check into Scottrade and Folio. I have been looking to join an RIA and give up a split but recently said screw it, I have the knowledge and experience running institutional portfolios in the past so I can do this for smaller clients on my own. This mixed with EIAs is a great combination for everyone.

Thanks again gentlemen for your help!

----------

I have been in the BD world for many years but am switching to RIA, getting 65 soon. This is the way the industry is shifting in my opinion....

RIA in a Box is widely used and comes highly recommended. The ongoing compliance price I quoted is their "Silver" package, it goes up to Platinum I think. But it is basically a turn key way to start your own RIA. They know what they are doing.

Of course the $3k does not include E&O or anything else like that. It just covers the legal fees of the paperwork, business registration, State/FINRA registration, etc.

And Im not sure exactly what cut the Custodian will take of your AUM. They probably offer a flat fee model too.

I agree that the industry is headed towards the Fee based model. The hybrid model has become very popular lately. But Im with you, I want Fee ONLY.

Check out wealthmanagement.com and their forum. Hopefully Sam will not get mad at me for recommending a different forum... but they can give you even better advice than I can about this subject. There are already LOTS of threads about this over there. It is where I learned the majority of what I know about the setup process and options surrounding it.

 

[pfg1]

One of the things I understand a 65 is for is to be compliant with securities law when rolling over some 401(k) money into an annuity. Is that right?

You only need an insurance license to roll $ into an annuity (fixed or indexed), unless its a variable annuity - in that case you need a 6 & 63. No 65 needed.

If so, since you probably wouldn't be rolling over the whole nest egg, the 65 allows for the rest of the 401(k) money to be put with a money manager, who charges a fee and you, the agent, can share in that fee. Am I right?

Yes, that part is correct. If you place money with a money manager, you can get paid on aum. Your % will vary based on how your RIA is set up

What about other securities the client might have? Can they be put with the RIA so he would have only one place, and one monthly statement? Or is that a no-no, because a 7 is needed to trade securities?

Unless you are properly licensed, you cannot handle the other securities if you only have a 65. For example, you could not sell the client mutual funds. The managed money and other securities would most likely be with different companies, separate statements.

 

[scagnt83]

Unless you are properly licensed, you cannot handle the other securities if you only have a 65. For example, you could not sell the client mutual funds.

As I understand it you cant SELL them MFs... but you can PLACE clients in MFs from your custodial account.

In other words, you just cant reap the commission from it... so most 65s use true no-load funds if they do... although most seem to be using actively managed ETFs these days.

A 65 can do anything a 6 or 7 can from what I understand... they just cant be paid a commission, they have to charge a Fee.

 

[DHK]

You would need a trading platform to trade securities that are not with a 3rd party money manager. I know TradePMR is one such platform.

Also, you can set up 529 plans with the mutual fund companies directly - using F-shares (American Funds). I don't know the process of getting established with them, but they should be able to help you.

https://www.americanfunds.com/advisor/investments/share-class-information/share-class-pricing.html