Ex-Morgan Stanley FAs Split to Offer Clients ‘Full Transparency’
Advisor Sean Richardson left Morgan Stanley on July 8 to co-found an independent RIA, AllStreet Capital. Joining him at the Los Angeles-based firm is his longtime partner and another ex-Morgan Stanley FA, Max Lile. The team managed more than $150 million and generated annual revenue of around $1.2 million at Morgan Stanley. The practice is using Fidelity as its custodian.
Q: Why did you leave Morgan Stanley?
A: After 13 years at Smith Barney and Morgan Stanley – as well as eight years at UBS – we really wanted to move into a business model that gave us the ability to act as true fiduciaries. What I mean by that is we wanted to be conflict-free with full transparency.
Q: Did you feel limited in a wirehouse environment?
A: To a certain extent. The business model at the wirehouse is more proprietary product driven. They talked to us in sales meetings about ways to increase our income, which came down to selling more loans and other types of proprietary products. But we’d been there for long enough where they didn’t really pressure us. They’d make suggestions, but as seasoned advisors they pretty much let us do our own thing.
In more than 20 years in the business, we’ve never sold proprietary products. So it just came down to making more business sense to us to run our own RIA.
Q: How will this move help your firm grow?
A: It gives us full control over 100% of the revenue. So we’ve decided to target some specific areas. One is to reduce client fees, in some cases by significant amounts. We feel like that’s not only going to be important for our firm’s growth in such a highly competitive RIA market, but it’s also fair and the right thing to do for our clients.
Q: How else do you plan to take advantage of being your own bosses?
A: We’re also building into our long-term business plan a strategy of investing more in our employees. We’ve already brought with us our sales assistant, Terri Pacheco, who’s been with us for 20 years. But we’re planning on hiring more staff as our practice grows. The point is that by owning our own business, we’re making sure to set aside a bigger part of the pie to growing our staff.
Q: Besides staffing and client fees, what other aspects are you investing in?
A: We want to help spur more growth through acquisitions. We expect to keep gaining new clients through referrals, but to help complement that type of organic growth we’re already putting out feelers about potential mergers and acquisitions with smaller practices. That’s one of the attractive opportunities we see in going independent – the demographics show there are increasing numbers of RIA owners who are aging and looking at succession planning. We think a growing firm like ours can offer a lot of synergies to those types of advisors.
Q: What about technology at the new firm?
A: One of the things that has made becoming an RIA so readily accessible is development of so many third-party platforms. The technology today is so much more advanced than it was even five years ago. We’re using MoneyGuidePro in our new practice. We used the same basic package at Morgan Stanley, but it was a much more slimmed-down version. For our back office we’ve chosen to go with Fidelity, which gives us access to all of the trading capabilities and much of the research that we’ll need operating as an independent. We’re also using software from Orion for performance reporting.
Q: What was the hardest part of the move?
A: Just coordinating all of the moving pieces. We had to make sure everything worked together in terms of legal and compliance issues, technology, marketing and basic daily operations. It just takes many, many months. I’ve heard stories of other advisors who’ve tried to start RIAs in four or five months. I wouldn’t recommend that to anyone – we probably started planning for this process 18 months in advance. So you’ve just got to realize that starting a new business from scratch isn’t something that can be achieved overnight. It takes a lot of preparation and advanced planning.
Q: How has the move impacted your clients?
A: It hasn’t been difficult for our clients, although in some way I imagine it can be a little annoying to them. They’ve got to go through the process of completing new paperwork and getting used to new technology in terms of signing into their accounts and learning how to take advantage of new screen options.
But since we’ve been working with many of our families for more than two decades, a lot of the initial feedback we’re getting is excitement for Max and me. A common question we used to be asked when we worked in the wirehouse environment was why we refused to sell products directly ourselves. So this move to independence is making a lot of sense to them – we’ve put a lot of thought and effort into making sure it’s been a very transparent experience for all of our clients.