Fixed-income solutions for breakaways entering the RIA space

Wirehouse advisers fear that they'll have less access to fixed-income investments in the independent space, but the opposite is true

Jun 25, 2019 @ 12:13 pm

By Matt Sonnen

Wirehouse advisers are often sold the idea that the independent channel cannot support sophisticated investment solutions. So a major concern for breakaway advisers as they make the move to independence is how they will recreate the products and services they have had available to them in a wirehouse environment.

What they don't appreciate (and what their branch manager is often hiding from them) is that the maturation of the RIA industry has coincided with the rise of innovative solutions that allow advisers to access fixed-income investments in a variety of ways, across many service providers.

Within a wirehouse, advisers can easily check their screen for their fixed-income trading desk's inventory, pick up the phone, and place a trade with highly skilled fixed-income professionals.

Advisers are usually brainwashed into believing this level of support and access will not be available to them as an independent adviser.

In reality, said Mark Albers, founder of Kinetic Strategic Partners, "When advisers learn about fixed-income trading in the RIA channel, they realize they will have greater access — and better execution options — for their clients."

This is possible because the major RIA custodians let advisers execute fixed-income trades at any trading desk they choose, across all Wall Street institutions, and settle trades in the clients' custodial accounts.

Eric Bodner, partner of Kore Private Wealth, an RIA that broke away from Merrill Lynch, where they managed $5 billion in client assets, in June 2018, said, "It wasn't until we broke away that we realized the opportunity we had with this business."

"Our muni business is much more robust than it's ever been," Mr. Bodner said. "While we still have the same access to risk management and reporting systems as we did at our prior firm, our coverage universe has expanded immensely."

(More: 3 ways to take your planning business to the next level)

Some areas for advisers to consider as they choose the best way to access fixed income for their clients include: the amount of investible capital; attitude regarding the direction of interest rates; liquidity needs; diversification; predictability of income; tax considerations; and which area of the fixed-income market the client is looking to access.

If an adviser chooses to use bond funds or ETFs, those can easily be accessed through their custodial platforms. And while access to individual bonds may not be as straightforwardas in the wirehouse community, advisers in the RIA channel have just as many (or oftentimes even more, as some advisers have learned) viable fixed-income solutions available to them and their clients.

(More: Fixed-income focus: Beware ending up with the 'ultra-short' straw)

Here are three solutions that allow advisers to access and trade individual bond securities:

• 280 CapMarkets. A technology platform that leverages cloud-based services to provide advisers with a broad universe of bonds, pre-trade price clarity and best execution support.

• CBXmarket. A financial technology company that enables advisers to efficiently navigate through the bond markets by leveraging their best-in-class portfolio management software solution.

• Northern Capital. A leading fixed-income investment platform that lets advisers create customized portfolios of individual bonds at institutional prices.

Many breakaway advisers wrongly assume they will be forced to give up individual bond positions within client portfolios and will only be able to gain access to fixed income through funds.

But there are many solution providers in the RIA space specializing in fixed-income trading that can use their scale and experience to offer the asset class to the masses. Advisers considering independence, as well as existing RIAs looking to improve their investment solutions, can now act with confidence in their ability to offer sophisticated investment solutions to their clients.

(More: 5 building blocks to becoming a successful buyer)

Matt Sonnen is founder and CEO of PFI Advisors.


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