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Why the Breakaway Broker is an Overplayed Story

By Crucial Clips     April 11, 2018
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Feb. 28, 2018 

BRUCE LOVE, MANAGING EDITOR, FINANCIAL ADVISOR IQ: Hi, this is Bruce Love with Financial Advisor IQ, and I’m here with Fielding Miller, who is the founder of CAPTRUST. Fielding, it’s about 20 years ago that you left a regional brokerage and founded CAPTRUST. We’re seeing another wave of breakaways coming now. We’re seeing people trying to stop the breakaways, as well, you know, with changes in the--

FIELDING MILLER, FOUNDER & CEO, CAPTRUST: Protocol.

BRUCE LOVE: Yeah, with Morgan Stanley and UBS pulled out of the broker protocol. What’s your thoughts on the environment when you broke away and the environment now?

FIELDING MILLER: Well, there’s a lot more options today to break away to. You know, there’s a lot of platforms out there that I think are very competitive and offer pretty much anything you need to hang your shingle. We didn’t have those options back when we started where they were few and far between, I’ll just say that much.

You know, I think the breakaway broker is an overplayed story. If you really do the math, it’s not that many people breaking away. I mean, it’s kind of news when it happens, but do the math and think about the thousands and thousands of brokers that are out there. It’s not like they’re leaving in droves, even though if you watch the news it kind of feels like they are. So you know, better options, but not any massive exodus that I see.

And I think the brokerage firms will get better, they’ll adapt. The fiduciary rule had tremendous potential to accelerate some of that change. Merrill and others were talking about going to a fee-based construct. I’m not sure where that is today, but they are morphing, I think. We position ourselves as RIAs and fiduciaries, that’s kind of been our schtick for a long time. I think the brokerage firms try to do that in certain ways, and we’ll see how this fiduciary rule finally lands, but that could very well be fiduciaries with exemptions and things like that. So the landscape has always been hypercompetitive. I don’t expect that to change.

BRUCE LOVE: No, I think you make a good point that you read the news and it seems like there’s this great exodus, you know, to people going independent. But actually if you look at the numbers, a lot more people are still staying where they are. I mean, it takes a lot to break away and become successful. You did it. You know, were there were times early on where you didn’t think that it -- it hadn’t been the right move?

FIELDING MILLER: Well, I’ll say that’s a young man’s game. You’ve got to have a little naivete and a lot of gas in the tank to do that sort of thing. Because your responsibility to your clients doesn’t change. And then you’ve got to run a business. And then if you want to grow that business, you know, there’s a lot of things that tug at you to kind of take your eye off the ball serving clients. And so you have to be really careful with that.

And frankly, I think some people break away thinking they’re going to make more money. In reality, it takes a while. You know, they get enamored by the supposed payout, but you start to add up expenses pretty quick. And so I don’t really think that’s the reason to do it. Anyway, that’s just been my experience.

BRUCE LOVE: Fielding, thank you very much.

FIELDING MILLER: OK, thank you.