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Ex-Wirehouse Advisor Shreds “Cookie-Cutter Menu”

By Murray Coleman July 17, 2015

David Neal had worked at UBS Financial Services for 15 years when he left in April to join Frontier Wealth Management in Wichita, Kan. Moving with Neal were three other ex-UBS advisors — and two full-time staffers — who as a team managed about $750 million at their old shop.

Q: What was the main reason you left UBS?

A: We wanted to take more of a multi-family office approach to serving clients. The brokerage model is based on bringing in more and more clients year after year. We felt like working at a large brokerage was too confining and forcing us to stick with a cookie-cutter menu of services. We wanted to be able to provide a broader set of concierge services and tap into a growing number of outside resources that could help us give our clients more in-depth analysis of their most sophisticated planning needs.

Q: Why did you choose Frontier Wealth Management?

A: They’re an independent RIA. Along with my three other partners, we really wanted to control our own destinies. But we didn’t want to be involved in the day-to-day business operations. So Frontier gives us the best of both worlds — they take care of the back-office and administrative parts of the business. They’ve also got in-house expertise for our clients to tackle a host of complicated planning issues, ranging from helping with business valuation issues and tax planning to developing sophisticated trust and insurance strategies.

Q: Are you captive advisors at Frontier?

A: Yes, we are employees of Frontier. But we’ve got the freedom to choose any investment product and set up any third-party service relationship that we see fit. We also were given a seat at the table on Frontier’s executive committee. That was important to us during negotiations. We’d been dictated to for 15 years. We wanted to have a voice in our company’s long-term strategic growth plan.

Q: Did you fire many clients?

A: We prefer to look at it as deciding which clients fit best with our model. In that sense, some of our old clients were better served staying at UBS. My personal book fell from 110 to 65 households, which gave me more time to spend with existing clients. At the same time, I felt like that level gave me enough families to work with to explore growth opportunities with new ultra-high-net-worth clients.

Q: What was the hardest thing about the transition?

A: Not being able to tell our clients and friends in advance. We followed the industry protocol. So we had to announce, after the fact, that we had left. I met with clients that night after everything became official. At 7 the next morning, I got on a plane and spent the next five days in 10 different cities across seven states sitting down with families at their dining-room and kitchen tables explaining what we were doing.

Q: How many of your clients came with you?

A: Slightly over 90 days into the process, we’ve seen more than 80% of the assets we managed at UBS transferred to our new firm.

Q: How did their fees change?

A: We identified more than $120,000 of various fees being charged at UBS that were going straight to the brokerage and not to the advisors. So the first thing we did for our clients was to eliminate all of those fees. And with greater flexibility to choose any investment product or service solution available in the market, we’ve been able to lower fees in other areas as well. Just as importantly, by eliminating all of the hidden costs that were charged at the brokerage, we’ve been able to introduce a higher level of transparency when disclosing our new firm’s total cost structure to clients.

Q: How about your compensation?

A: Right now, it’s roughly the same. The advantage at Frontier is that we can allocate pay as we see fit across the team — we’re not held to some arbitrary formula that dictates who gets what and tells us which types of activities are rewarded and which aren’t.

Q: Any advice for other FAs who are thinking about breaking away from a wirehouse?

A: An important question to ask firms is exactly who gets to decide what type of client you work with at any given time. I’d also suggest that when talking to other firms you make sure to find out exactly what planning strategies you can use. For example, UBS and a lot of big brokerages won’t allow you to give advice on private investments, closely held businesses or 401(k) assets held elsewhere. To be a full-service wealth manager, those are important issues to address before setting up shop somewhere else.