Archive for September, 2014

Succession backstop plans at platforms and aggregators may limit RIA talent pool #DDMSummit14 @finplan @paikert

Friday, September 26th, 2014

Financial Planning Magazine writes about Corey Kupfer’s presentation at the Echelon Deals and Deal Makers Summit:

The problem may get even worse for RIAs hoping to lure experienced advisors to their firms, said Corey Kupfer, director of entrepreneur services at MarketCounsel, an Englewood, N.J.-based consulting and compliance firm.
Large platform service providers and aggregators are about to step up their own efforts to lock up wealth managers looking for a new home.

More providers will begin to offer advisors considering selling their practices “succession backstop plans” to lock them up and keep them off the market, Kupfer told the deal makers at a session on human capital. If the advisors are looking for a succession plan or want to eventually sell their firm, these companies will agree to be buyers if needed, while also allowing the advisors to pursue a better deal if they are able.

In addition to standard inducements such as equity participation, profit sharing and stock options, larger firms are also increasingly offering “phantom equity” to advisors bringing over substantial books of business, Kupfer said.  Phantom equity allows advisors to be contractually treated as if they owned equity with a right to participate in net profits, though without ownership rights such as voting at board meetings, said Kupfer, who is also an attorney for MarketCounsel president and chief executive Brian Hamburger’s law firm.

Read more.

@BloombergNews Speculates on @mcuban vs Chris Cox… “a Little Ugly”… Hmmmm

Thursday, September 25th, 2014

@BloombergNews article, “Talk Isn’t Cheap,” anticipates a duel at the MarketCounsel Summit 2014 #MSUM14:

Since 2006, Brian Hamburger (@HDelux) has built and branded his business with an annual conference featuring high-profile speakers — not at lecterns but on panels, sparring.  In December, Hamburger says, he expects to host 550 people at the Four Seasons Hotel in Las Vegas. Mark Cuban, owner of the National Basketball Association’s Dallas Mavericks, is scheduled, alongside former U.S. Securities and Exchange Commission Chairman Christopher Cox.  In October 2013, Cuban beat an SEC investigation begun under Cox when a Dallas jury rejected claims that he used inside information to sell his stake in a Canadian Internet company nine years earlier, thereby avoiding a loss.  If all goes as Hamburger hopes, the encounter between Cuban and Cox in Nevada will get just a little ugly.

Read more.

NASAA Expected to Implement Model Succession Planning Rule

Thursday, September 25th, 2014

ThinkAdvisor reported that Patty Struck, chairwoman of the securities division for NASAA, said that NASAA expects to make changes to the Uniform Securities Act to include “prescriptive, but broad” requirements for advisors to implement written procedures to address business continuity and succession planning.

Most advisors have implemented business continuity plans, but they often don’t consider the succession planning aspects.  Advisors have been told for years to have succession plans in place for business purposes, but a plan is necessary in order to meet their fiduciary duty to clients as well.  Even without a state or SEC rule, an advisor must ensure that clients are taken care of if something happens to a key person.

All advisors should have a succession plan.  While plans can be complicated, they can also be simple.  Advisors should review their risks and implement at least a limited succession plan while working on the rest.

NASAA Expected to Implement Model Succession Planning Rule

Thursday, September 25th, 2014

ThinkAdvisor reported that Patty Struck, chairwoman of the securities division for NASAA, said that NASAA expects to make changes to the Uniform Securities Act to include “prescriptive, but broad” requirements for advisors to implement written procedures to address business continuity and succession planning.

Most advisors have implemented business continuity plans, but they often don’t consider the succession planning aspects.  Advisors have been told for years to have succession plans in place for business purposes, but a plan is necessary in order to meet their fiduciary duty to clients as well.  Even without a state or SEC rule, an advisor must ensure that clients are taken care of if something happens to a key person.

All advisors should have a succession plan.  While plans can be complicated, they can also be simple.  Advisors should review their risks and implement at least a limited succession plan while working on the rest.

Advisory Committee to Recommend Major Changes to Accredited Investor Definition

Wednesday, September 24th, 2014

The definition of “accredited investor,” the qualification that allows for investment in a private placement, has been in place for decades.  It is primarily based on the income or net worth of the investor because “rich” people can afford to fend for themselves.  The definition, however, has not substantially changed in nearly 35 years so it’s questionable if accredited investors are really rich.  Because of this lag, the Dodd Frank Act required the SEC to review the standard every four years.

The Investor Advisory Committee is not only recommending that the income and net worth standard be adjusted, it’s also asking the SEC to review if this type of test is even the right approach.  According to an article in InvestmentNews, the committee intends to recommend the SEC move to a sophistication determination through a review of credentials, investment experience, financial knowledge or a skills test.  This could be burdensome and subjective.  Alternatively, the committee will recommend that the SEC limit the percentage of net worth invested in private placements.

The committee only has the ability to make recommendations to the SEC and there has been no hint that the SEC is interested in rewriting the accredited investor definition from scratch.  Expect any changes that would make it significantly more difficult to invest in private placements to be fought by the hedge fund and venture fund industries, amongst others.

FINRA Lightens Broker Compensation Disclosure Rule Proposal

Tuesday, September 23rd, 2014

According to an article in the Wall Street Journal, FINRA announced that it will propose a new less stringent proposal regarding broker disclosures of recruitment compensation.  Rather than requiring specific disclosure to be delivered to clients being asked to move firms with a representative, the broker-dealer would be required to send out a list of suggested questions that clients may consider asking the representative before moving their account.  One of the questions would be whether the representative was getting a bonus for moving.

While MarketCounsel had concerns about the previous compensation rule, this watered down version just seems to add to the noise that clients receive.

Are All Venture-Backed Firms Out for Short-Term Profits?

Tuesday, September 23rd, 2014

In an interview with @RIABiz:

Brian Hamburger @HDelux, president and founder of MarketCounsel Inc. of Englewood, N.J., who works with many of the venture-backed RIA robo-firms, says that public perception that they are under the gun to show results is misplaced.  “I am on the phone to venture backed firms on a regular basis and they’re not talking about meeting profits right away. They’re taking a more thoughtful approach.” he says.

Read more.

Are All Venture-Backed Firms are Out for Short-Term Profits?

Tuesday, September 23rd, 2014

In an interview with @RIABiz:

Brian Hamburger @HDelux, president and founder of MarketCounsel Inc. of Englewood, N.J., who works with many of the venture-backed RIA robo-firms, says that public perception that they are under the gun to show results is misplaced.  “I am on the phone to venture backed firms on a regular basis and they’re not talking about meeting profits right away. They’re taking a more thoughtful approach.” he says.

Read more.

Hamburger Sees a Quick Trigger Trend on Wirehouse Terminations

Monday, September 22nd, 2014

In response to Merrill’s sudden termination of a $2.5 billion PBIG team, Brian Hamburger offers his thoughts to @RIABiz:

“These are five situations that, in the past, were not a terminable offense,” says Brian Hamburger.  He says its likely that force has been unleashed due to a hair-trigger response the wirehouse has developed since losing its biggest and best teams to independence.

“The firms are demanding loyalty,” Hamburger says. “It’s one of the regulatory protections that creates a really bright line about whether you’re in or out. That regulatory protection is used for protecting the workforce even if it’s being used in a way it was never intended.”

But if Brown and Goetz are pondering starting an RIA or joining another firm, then they have some quick maneuvering to do.  Hamburger says the key is for the Brown-Goetz lawyers to make clear to Merrill Lynch that the U-5 language needs to be relatively benign or that the firm will face U-5 defamation charges.  The U-5 isn’t finalized for 30 days but then remains a permanent mark on the advisor’s record. Top-tier wirehouses will not take on a fired broker unless the U-5 language is relatively benign, Hamburger says. “That’s why we do this under the cloak of darkness and all at once.”

Read more.

MarketCounsel’s Hamburger Reveals What’s Behind Every Successful Move to Independence to @newsfromIN

Tuesday, September 16th, 2014

In a video interview with Investment News, Brian Hamburger @hdelux discusses the biggest fears that stop advisers from breaking away and how to combat them.