I believe that “registered investment advisor” is the greatest business model in the financial services sector, but it’s so much more than that. It’s a movement that, at its core, has always been about the entrepreneurial spirit. It’s about building a business where a financial advisor’s own success is tied to generating wealth for their clients.
I founded TradePMR to advocate for that belief. As a former RIA, I wanted to build a firm with a mission to exclusively serve the needs of RIAs; to help those advisors build a culture that empowers them to perform at their best.
The story behind that belief, and why I eventually made the leap to launch my own custodian, begins with an Easter basket.
There wasn’t anything unique or special about this Easter basket. I received it from Lloyd, a wholesaler for a mutual fund company, as an award for winning a mutual fund sales contest. It was filled with traditional swag like golf balls and coffee cups – you could tell Lloyd had just been to an industry conference.
But tucked into the back of that basket was the latest edition of an investment advisor magazine. Written across the cover in bold lettering was the lead story: “How to Become an RIA.”
I recognized that term. Back then, I would go to the library to read prospectuses of successful money managers. I studied guys like Peter Lynch, who averaged a 29.2% annual return between 1977 and 19901, as the manager of the Magellan Fund at Fidelity Investments. The perception that I had as a young broker was that investors like Lynch were successful because of the firms they worked for. But in his prospectus, I encountered the phrase, “registered investment advisor.” It turned out that Lynch was actually an RIA that Fidelity contracted out to run the assets in the Magellan Fund.
As I studied the prospectus I thought, “Wait a minute, I sell those funds and I get a trail of 25 basis points and then take home even less than that. This guy is making 1.8% managing these funds. What is this registered investment advisor thing?”
I’m dating myself a bit, but in that day and age, no one had ever heard of RIAs. As a matter of fact, there were only about 480 of them in the country and most of them were hired to run mutual funds.
Well, there was about to be one more.
Imagine my excitement when poking out of that Easter basket was a guide for getting into this new business model. I read it cover to cover and realized that it was the best opportunity in the financial services sector that I had ever laid my eyes on. It was the chance to create a company for myself, something that I owned and controlled and could eventually sell or transfer to my kids. I absolutely fell in love and knew right then and there that breaking away and becoming an RIA was my next move.
That Easter basket changed my life. It was my springboard to dive into independence. I resigned and got to work starting my business.
At the time, there were only three custodians: two of the large companies you know today, and a little firm called Jack White & Co. I contracted with all three, but I quickly recognized that the smaller company was so much better at servicing me than the other two. They knew my name every time I called. My guy, Ian, did a great job and I’ll never forget him.
When Jack decided to sell to a much larger, well-known firm, I trusted that this transition to a large custodian, which included the movement of hundreds of thousands of accounts, would be seamless.
Big mistake. Overnight, a large portion of my book of business – to the tune of $10 million – was misplaced. Clients were calling. They were upset. They were confused and would ask me, “Robb, I had $400,000 in my account last month, and now it says $0. Can you explain what’s going on?”
I had a real black eye in my local community. It took more than 2 months of me faxing statements and calling the firm to get things straightened out. I had to tell them to look for certain holdings in an omnibus account. I had to walk them through which funds belonged in which of my clients’ accounts.
This merger was supposed to be a non-event. In hindsight, my mistake was not taking control of this transition on my own terms. I realized that the people in charge of these transitions had never walked a day in my shoes. They just didn't get it.
When that firm finally gathered every advisor who had been affected by the transfer issue in a small room at an industry conference to apologize, I stood up to let them hear my frustration.
“You have no idea what this has done,” I told them. “This should have never happened, and I wasn’t communicated with properly. This will never happen again because I’m going to start my own firm.”
That’s when I decided to start TradePMR. I knew advisors needed a partner that understood the ins and outs of running their own business. I wanted to build a business based on relationships and trust, and one that didn’t conflict or compete with the advisor’s goals.
I had no idea that starting a custodian would be such a large undertaking, and it took a long time for this endeavor to turn profitable. Seven years, actually. It became abundantly clear that advisors need reliable technology, so I quickly made the decision that we would be a firm that built, not bought, technology.
But I believed then that RIAs deserved better. I built a firm to serve RIAs the way I wanted to be served. The TradePMR story is about never forgetting where I came from; why I built a firm centered around RIAs and relentlessly fighting for their success every single day. Because that’s what RIAs do for their clients.
Here we are 25 years later, still doing that exact same thing. Our number one focus is on helping RIAs grow and we plan to keep doing it for the next 25 years. This is my life’s work. I am extremely proud of the work we do every day on behalf of advisors for their clients.
All thanks to that one Easter basket.
- https://web.archive.org/web/20160305012538/http://theguruinvestor.com/2009/09/18/garp-pegs-and-peter-lynch/