Thursday, July 21, 2011

The Future of Financial Advice Delivery

There is no idle time as far as I am concerned. I am always reading, researching or writing when I have a little free time. Today is no exception.

I watch what other people and companies are doing to be successful in the financial advice delivery field. There is a very important and significant trend developing. It is still in the early stages, but shows a lot of promise for those smart enough to take advantage. Being one of the first to the market is also important. A case in point: The Mutual Fund Store. Although, I have never been in one of these stores, I understand the concept behind it very well. The founder of this firm had an idea to franchise retail investment advice via his Mutual Fund Store concept. The keys here are the retail store aspect and the franchise aspect which I will get back to in a moment. First we need to take a look at what the big boys are doing today.

Normally, you would not think of financial advice being delivered by a Registered Investment Adviser (like my firm) in a retail store. However, most people have seen Edward Jones, Fidelity, Schwab, Scottrade and TD Ameritrade retail branch offices in their cities. These firms are all brokerage firms and they each have their own niche. These are all my own opinions that follow:

Edward Jones has over 10,000 branch offices I believe. They kind of remind me of when I was in college as a Sigma Alpha Epsilon Fraternity member. We always used to joke, "if you can't go greek, go TKE." The TKE's had a fraternity chapter on every corner it seemed. Edward Jones kind of reminds me of TKE. They offer full service in a retail setting, although you will pay full price in more ways than one.

Fidelity has their own mutual funds with very high management fees by the way and they are a leader in pension plans. They also act as a custodian for Registered Investment Advisers. In addition, they have active trader tools that a lot of traders like. Also, they have really nice retail branch offices, but they are  mostly in high net worth cities.

Schwab is the biggest retail brokerage firm from an assets under management standpoint and they are also the biggest custodian for Registered Investment Advisers. Their branch offices are second to none. Schwab has long sold financial advice to their customers in a retail environment. They have their own mutual funds and ETF's, too.

Scottrade caters to active traders and has recently tried to become a force in the custodian business, too. I believe they have more branch offices across the U.S. than Schwab or Fidelity or TD Ameritrade.

TD Ameritrade is highly regarded as being on the side of Registered Investment Advisers, but like Schwab, they also have retail branch offices where they sell financial advice and encourage active trading.

Enough of my opinions. I need to get to my point on retail financial advice delivery.

I have watched as The Mutual Fund Store has grown from nothing to over $6,000,000,000 in assets in a very short period of time. That is billion with a B. This proves without a shadow of a doubt that financial advice can be delivered in a retail fashion by Registered Investment Advisers.

Recently, Schwab has come out with a new branch office concept where they convince Registered Investment Advisers to become independent branch offices for Schwab. Their plan is to bring on board experienced investment advisers who already know how to add new clients and pair that with the Schwab brand and give them an independent office to attract new customers. I truly believe that this will be hugely successful as they work through the kinks.

The Mutual Fund Store uses Schwab as their custodian, or one of their custodians at least. I cannot help but wonder if Schwab did not see the success that The Mutual Fund Store was having and developed this new retail branch office based on the using Registered Investment Advisers as the branch managers, like The Mutual Fund Store was doing. I bet that I am correct about this fact.

Nevertheless, I see a financial advice delivery trend developing. Registered Investment Advisers delivering financial advice via a retail setting. Today, almost all guys like me are in nice office complexes similar to a lawyer, accountant, or doctor's office. However, I now believe that this may be indeed changing to a retail environment.

Guys like me, however, cannot just go move into a retail strip mall and setup shop. You have to have a concept that matches the retail setting. There needs to be a lot of planning and a neat retail idea.

Speaking of ideas. I do believe I have one! In fact, I am working towards one right now. Of course, I would love to tell you about it, but if I did that, someone might steal my ideas and beat me to the marketplace. So, unfortunately, you are going to have to wait. The good news is that I will keep everyone updated as to my progress via this Blog.

Stay tuned for exciting updates.