Fixed Income Solutions for Breakaway Advisors Entering the RIA Space

June 25, 2019, by Matt Sonnen
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Wirehouse advisors are often sold the idea that the independent channel cannot support sophisticated investment solutions.  Therefore, a major concern for every breakaway advisor as they make the move to Independence is how they will recreate the products and services they have always had available to them in a wirehouse environment.  What they do not appreciate (and what their branch manager is often hiding from them) is that coinciding with the maturation of the RIA industry has been the rise of innovative solutions that allow advisors to access fixed income investments in a variety of ways, across many service providers.

Within a wirehouse, advisors can easily check their screen for their fixed income trading desk’s inventory, pick up the phone, and place a trade with competent and highly-skilled fixed income professionals.  The advisors are usually brainwashed into believing this level of support and access will not be available to them as an independent advisor.

In reality, as Mark Albers, founder of Kinetic Strategic Partners, states, “When advisors 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 allow advisors to 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 in June 2018 where they managed $5 billion in client assets, states, “It wasn’t until we broke away that we realized the opportunity we had with this business.”  He concludes, “Our muni business is much more robust than it’s ever been; 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.”

Some areas of consideration for advisors to think about when choosing the best way to access fixed income for their clients include: the amount of investable 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 advisor 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 straightforward as in the wirehouse community, advisors in the RIA channel have just as many (or oftentimes even more, as some advisors have learned) viable fixed income solutions available to them and their clients.

PFI Advisors recently issued a white paper providing a detailed look into fixed income solutions available to RIAs.  In the report, PFI highlighted three solutions that allow advisors to access and trade individual bond securities:

  • 280 CapMarkets – A technology platform that leverages cloud-based services to provide advisors a broad universe of bonds, pre-trade price clarity, and best execution support 
  • CBXmarket – A financial technology company that enables advisors 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 allows advisors to create customized portfolios of individual bonds at institutional prices 

Many breakaway advisors wrongly assume they will be forced to give up individual bond positions within client portfolios and only gain access to fixed income through funds.  As PFI Advisors’ research concludes, 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.  Advisors considering Independence, as well as existing RIAs looking to improve their investment solutions, can now act in confidence in their ability to offer sophisticated investment solutions to their clients.

This article originally appeared on InvestmentNews.

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