Archive for January, 2012

Planning Industry Braces for ‘Aggressive’ Consolidation Ahead

Monday, January 30th, 2012

Financing Planning, reporting on the Financial Services Institute’s annual OneVoice conference, quoted various planning executives who expect aggressive consolidation in the industry.  Factors cited include decling margins, the need for capital for technology, recruiting and platform development, and the cost of regulatory, compliance and legal issues.

Frank Not Acting Like Lame Duck; No Fan of SRO Bill

Friday, January 27th, 2012

Representative, Barney Frank, who currently serves as a ranking member on the House Financial Services Committee, announced in late November that he will not seek re-election and plans to retire from Congress at the end of 2012.  However, according to Investment Advisor magazine, Mr. Frank has vowed to defend the Dodd-Frank financial reform act that bears his name.  Recent comments made by Mr. Frank, including those to Investment Advisor, signal that he will vote against House Financial Services Chairman, Representative Spencer Bachus’ legislation calling for a self-regulatory organization (SRO) for advisors.  When Investment Advisor asked Mr. Frank what he thought about Mr. Bachus’ SRO bill, he replied: “I don’t like it.”  Like other industry trade groups that are fighting against Mr. Bachus’ bill, Mr. Frank said at a Capitol Hill press conference in late November that he’s “skeptical of self-regulatory agencies” and that he would “not want to detract at all from the responsibilities of public agencies.”  Mr. Frank has been a staunch proponent of boosting funding for the Securities and Exchange Commission (SEC).  While Mr. Frank’s status as a ranking member on the House Financial Services Committee is unlikely to prevent an SRO bill from being reported out of his committee, his objections to such legislation “can create a strong partisan bill” that reaches the House floor and “sends a signal” to the Senate about the problems associated with an SRO.

HighTower stages its first raid of Morgan Stanley Smith Barney’s elite consulting unit

Friday, January 27th, 2012

According to an article in RIABiz, HighTower Advisors LLC recruited James Pupillo, a leader from Morgan Stanley Smith Barney LLC’s Graystone Consulting unit.

Pupillo joined HighTower on Jan. 20 and represents the company’s first branch office in the Southwest. He is based in Scottsdale, Ariz. and Barron’s lists his team as having $2.6 billion of assets under advisement. Pupillo is joined in the breakaway by directors and partners Brian Hein and David Brasfield.

More wirehouse brokers expected to bolt this year

Wednesday, January 25th, 2012

An Investment News article states that more brokers will shift to the independent RIA channel this year as markets stabalize and retention deals wind down.  It quotes all of the major custodians and other industry player as expecting an increase in activity in 2012.  A report from Cerulli Associates Inc. this month predicts that the wirehouses’ market share of assets will drop from an estimated 43% last year to 35% in 2013.  Custodians have also been picking up representatives from independent broker-dealers that have been forced to shut down due to problems with failed private placements and high regulatory costs.

According To A Tiburon Report Wirehouses Will Create Their Own Independent Models

Friday, January 20th, 2012

RIABiz is reporting on a Tiburon Strategic Advisors report titled “The Independent Reps & Independent Broker/Dealers Market: The 21st Century Model?”  The report makes a number of bold predictions including that wirehouses, seeking to stem the tide of breadaway brokers will emerge with their own independent models to retain advisors this year.  These “halfway houses” will provide quasi-independence.  Chip Roame, Tiburon Managing Director,  believes that wirehouses now realize that it is worth offering a higher payout to quasi-independents because it would stem the tide of breakaway brokers.

The article points out that, on the other hand, this concept is not new and that a few year back Bing Waldert, Managing Director of Cerulli Associates thought that the wirehouses were going to launch independent options.  Now, however, he thinks wirehouses are not interested in being independent despite the loss in market share.  He points out that they have cut costs, have strong financials and that it would be inconsistent with all the time the wirehouses have spent to debunk the myth of advisor independence.

According To A Tiburon Report Wirehouses Will Create Their Own Independet Models

Friday, January 20th, 2012

RIABiz is reporting on a Tiburon Strategic Advisors report titled “The Independent Reps & Independent Broker/Dealers Market: The 21st Century Model?”  The report makes a number of bold predictions including that wirehouses, seeking to stem the tide of breadaway brokers will emerge with their own independent models to retain advisors this year.  These “halfway houses” will provide quasi-independence.  Chip Roame, Tiburon Managing Director,  believes that wirehouses now realize that it is worth offering a higher payout to quasi-independents because it would stem the tide of breakaway brokers.

The article points out that, on the other hand, this concept is not new and that a few year back Bing Waldert, Managing Director of Cerulli Associates thought that the wirehouses were going to launch independent options.  Now, however, he thinks wirehouses are not interested in being independent despite the loss in market share.  He points out that they have cut costs, have strong financials and that it would be inconsistent with all the time the wirehouses have spent to debunk the myth of advisor independence.

TD Ameritrade Mulls RIA Succession Financing

Friday, January 20th, 2012

Registered Rep is reporting that TD Ameritrade Institutional President Tom Bradley said that TD is evaluating three options on succession financing for its RIA clients — using its own captial, partnering with TD Bank or staying out of financing directly and instead referring to outside parties such as aggregators.  The article points out that Schwab Institutional is also working on a program to provide financing for succession.  It goes on to discuss the competitive and demographic reasons for the interest of TD and other custodians in providing this financing.

Senators Schumer, Toomey Announce Bipartisan Plan to Make it Easier for Firms to Go Public

Thursday, January 12th, 2012

Senator Charles Schumer (D-NY) AND Pat Toomey (R-Pa) announced a bipartisan plan to make it easier for firms to go public so that they may expand and create jobs.  The proposal would make it easier for small and medium-sized companies to access capital through public markets.

Studies show that more than 90% of job growth occurs after a company goes public but fewer small and medium-sized companies are going public in recent years.  The reason most often given is the regulatory and compliance burdens of going public.  In a recent survey conducted by Nasdaq and the National Venture Capital Association, 86% of chief executive officers cited accounting and compliance costs, and 80% cited regulatory risks, as key concerns about going public.  Companies are now taking longer than ever to go pubic – an average of 9.4 years, compared to less than 5 years in the 1980s.  As a result, rapid expansion and job growth are being delayed.

The Reopening American Capital Markets to Emerging Growth Companies Act of 2011 would reduce the hurdles of an initial public offering by phasing in many of the costliest obligations over time while maintaining key investor protections.

Senator Schumer said, “During difficult economic times, it is critical that we give growing innovators the breathing room that they need to access public markets.  The vast majority of job creation occurs after companies go public so it makes sense to make the IPO process easier for emerging firms.”

Senator Toomey said, “In this struggling economy, Congress should do everything it can to make it easier for small businesses to grow and create new jobs.  This legislation will make it easier for firms to go public and in turn, create many more jobs.”

The Schumer-Toomey bill would establish a new category of issuers – emerging growth companies – that have less than $1 billion in annual revenues at the time of their registration with the Securities and Exchange Commission and less than $700 million in publicly-traded shares after the IPO.  These companies would have up to five years or until they reach $1 billion in annual revenue or $700 million in public float to comply with certain regulatory requirements.  These requirements are limited to those that are high-cost and which do not compromise core investor protections or disclosures and include:  the requirement that public companies employ an outside auditor; the requirement of audited financials for three years prior to the IPO (reduced to two); and the requirement for a shareholder vote on executive compensation arrangements.

The bill would also improve the flow of information about emerging growth companies to investors before and after an IPO and update restrictions on communications to account for advances in modes of communication and the information available to investors.  The bill would allow investors to have access to research reports about emerging growth companies before the IPO.  Additionally, the bill would allow emerging companies to gauge interest in the potential offering by expanding the range of permissible pre-filing communications to institutional investors and filing a registration statement on a confidential basis.

SEC Cracking Down on Hedge Fund Fraud

Tuesday, January 10th, 2012

According to an article in the Huffington Post, the Securities and Exchange Commission is focusing on investigating hedge funds that seem to be doing a little too well.  Citing a report in The Wall Street Journal that the SEC has devised a method of sorting data that highlights hedge funds whose balance sheets never seem to suffer, no matter how rocky the market gets, the article highlighted various civil fraud and insider trading actions recently commenced by the SEC.

2012 Projected To Be A Big Year for RIA Mergers

Tuesday, January 10th, 2012

According to an article in Financial Planning, 2012 will be an expecially active year for RIA mergers and related service provider deals.  The article cited on the LPL Investment Holdings announcement that it will buy Fortigent.  It went on to discuss the strategic advantages, the aging of advisory firm owners, the likely availability of credit from consolidators and regional banks and a Schwab Advisor Services prediction of a spurt of deals over the next 12 – 18 months.