Should I Leave My Broker Dealer This Year? [Episode 99]

“Should I leave my broker dealer this year?” is a question Matthew and Micah get rather frequently, so in this episode, you can expect a full answer to that. They discuss the experiences they have had with broker dealers, comparing the good and bad aspects of them, as well as the right way to go about leaving one if you chose to do so.

Listen in as the guys share how broker dealers have been helpful to their business growth in the past. You will learn why they decided to go their separate ways, how they managed to successfully break into the RIA space, and more.

Listen to the Full Episode:

What You’ll Learn In Today’s Episode:

  • Why your lack of success is NOT your broker dealer’s fault.
  • The good and helpful aspects of broker dealers that help you grow.
  • How to use compliance to benefit your business.
  • Where broker dealers fail and why RIA could be right for you.
  • How Matt and Micah made their transition to RIA.
  • The importance of having a plan before moving.
  • Things you can do now to create a strategy.

Ideas Worth Sharing:

If you’re using your broker dealer as an excuse for a lack of success, stop that! – @ThePerfectRIA Click To Tweet Come up with your plan – don’t tip that hand until you’re ready to move. – @ThePerfectRIA Click To Tweet It wasn’t the revenue we were giving up, it was the direction of our firm. How we wanted to interface with our client wasn’t exactly in-line with the way the broker dealer did it. – @ThePerfectRIA Click To Tweet

Resources In Today’s Episode:

Enjoy the show? Use the Links Below to Subscribe:

Read the Transcript Below:

This is The Perfect RIA, in case you didn’t know. Bringing you all the strategies to help your business grow. Are you happy? Are you satisfied? Are you hanging on the edge of your seat? Sit back and listen in while you feel the beat. Another myth bites the dust…

Matthew Jarvis:   Hello, everyone. Welcome to a new year and another episode of The Perfect RIA podcast. I am your host, Matthew Jarvis, and with me as usual, and we made it through another year together, the man, the myth, the legend, Micah Shilanski. Micah, how are you my friend?

Micah Shilanski:  Jarvis, I’m doing excellent. So excited and pumped about a new year. There’s so many awesome things that are happening just across the board, right? So super excited. Do want to give a shout out to our entire TPR nation.

Matthew Jarvis:   That’s amazing.

Micah Shilanski:  It has been a crazy journey that you and I have been on. It has been absolutely amazing. Again, started with a drunken podcast in a bar to now we’re peaking 20,000 downloads a month in our episodes, which is just amazing. And that is because of you, our listeners. Thank you so much. We enjoy putting this on. We’re super glad that you would get value out of this. And that’s what we’re dedicating this year to, right, is DMV-ing, delivering massive value to our audience, which is you guys. So help us stay on track with that. Keep us posted with any questions, any comments that you guys have so we can learn and improve. And we’re going to make this the best podcast possible for you.

Matthew Jarvis:   We really are, really are. I really want to take just one more second to celebrate. As entrepreneurs we’re notorious for not celebrate our victories, right? We’re notorious for saying, well, whatever I got done, I got done. In fact, Micah, you and I, several rewards that we set for ourselves we skipped because we’re like, oh, we got them done. Let’s just move on. Let’s skip the reward. And we had to really go back on that. But want to celebrate all of the people that are in our BackStage Pass. That was a huge success in 2020.

Micah Shilanski:  Oh my gosh.

Matthew Jarvis:   We also had, I believe four different Masterminds. One, two, three, four different Masterminds in 2020. We’ve got live 2021.

Micah Shilanski:  With COVID, right?

Matthew Jarvis:   With COVID, despite that. It’s been a lot of fun. Congratulations, by the way, to all of our BackStage Pass members and our listeners who have been emailing us nonstop with successes in their own practices, right? Fee increases, value increases, time increases with their families. The number of victories that we’re seeing, mind blowing. And thank you so much for sharing those.

Micah Shilanski:  And even highly, highly successful practices, right? 700, 800, a million under management, that’s there. They’re coming and saying, hey, these DMV items, these delivering massive value, we don’t hear this anywhere else. This is great stuff. And that is what we are committed to. So yeah, just again, quick little celebration, little thank you note that’s out there.

Matthew Jarvis:   All right. Enough back patting, let’s time to get to work. The question we’re tackling today, the question we’re tackling this year, should-

Micah Shilanski:  I’m so excited.

Matthew Jarvis:   I know, I know. Should I leave my broker dealer this year? And the short answer is, yes. And Micah, the long answer is …

Micah Shilanski:  The long answer is going to take a little bit longer, all right. But the short answer is absolutely, yes. Now this is a question that we get frequently. And I got to say, now, before we jump into the answer, Jarvis, let’s step back a little bit.

Matthew Jarvis:   Yes.

Micah Shilanski:  We were there, okay? This is not hyperbole. This is not theoretical information that you’re hearing. We only talk about information that we know about, or we’ll be very clear in saying, hey, this is a thought. We have never had an experience in this. But Jarvis, both you and I started off in an insurance only BD, right? Now you know, insurance license was my first license. That is the path that I started on.

Matthew Jarvis:   Yeah.

Micah Shilanski:  Then we went from there. Then I got my series license, right? Got the CFP. Got all of those things done, and then was at a broker dealer for years. And I got to say, it was good for me. I’m not going to say it was negative. I learned a tremendous amount of things, but it wasn’t the direction I wanted to go. So we went from that path of the BD to the IAR. Then from the IAR to the RIA only. It was a scary path. I do want to step back and recognize that. There were so many unknowns and so many mental blocks that were put out there. And I want to take some ownership on this, right? I was just about to blame the BD of saying all this other stuff that RAs are bad, and you’re going to die and get sued and lose your license if you move. But really that was just on me for not understanding and not knowing how everything worked.

Matthew Jarvis:   Yes.

Micah Shilanski:  But it’s been an amazing journey. And if it’s something that has piqued your interest ever so slightly, you need to go down that path further. And that’s what we’re going to talk about in the longer answer is, how do you go down that path? But before we rag on BDS, because I could rag on just about everything, let’s also talk about what are the good things about broker dealers. Because they’re not all bad, just to be clear. They’re not bad. They just have a different business than you may want to be in.

Matthew Jarvis:   That’s right. And really want to highlight that if you’re using your broker dealer as an excuse for your lack of success, stop that. One, we have seen amazing advisors in every format available from broker dealers to insurance channels, any channel you can imagine, Micah and I personally know an advisor who is crushing it, not just financially, but in delivering value to their clients. So whatever platform you’re on, you can have a wildly successful practice on that platform. Again, what we’re going to dive into today is, are you getting the ROI from that platform that you want to have? And those are some things that we’re going to look at today in this podcast.

Micah Shilanski:  Perfect. So let’s jump into a couple of areas where the BDS are good, right? And again, I’m not going to rag on them, say all BDs are bad. There are some that just really weren’t a good fit for us. There’s some that was a good fit. And they really helped us grow. I was at Summit Brokerage, and I’ll give a strong shout out to them, they really helped me grow. Their leadership, Marshall Leeds, et cetera, did some wonderful things to help us grow, right? And so one of the things that I think really helped me was that it was an instant community. And I think this is one space that the RIA world does not do very well, is it was an instant community of everyone that was on the same platform where we could all do the same things.

                  So when you go to those BD conferences, I looked at them as an opportunity to learn. And I went to everyone that had the nice little badges on their name tag and said, great, who is in the top clubs, right? And I started off at the bottom, I started off with a goose egg just like everyone else, and I worked my way up to the top level of production. And I would go and talk to those advisors. And most of the time, Jarvis, you and I had a different experience with this, but most of the time those advisors were able to open up and they would share with me what was working in them. And then, lo and behold, I would just do what they did. And then that would help grow my practice to that next level. And I want to say, that’s a really good positive of broker dealers is that community.

Matthew Jarvis:   Yeah, it really is. And the RIA space can be incredibly lonely. You really have to be proactive.

Micah Shilanski:  Yeah.

Matthew Jarvis:   Micah and I joke, it took us years and years and years to meet each other through online dating, aka the podcast, right? The RIA space can be very lonely, which is why we’re so passionate about things like the BackStage Pass or passionate about Masterminds. But you’re right, the broker dealer community does give you that. In my own broker dealer experience, we were at two different broker dealers, those broker dealers didn’t have that community. The guys that were at the top were just pounding their chest and they really weren’t interested in sharing with the guys at the bottom. So that wasn’t an advantage to me. But like you said, Micah, at some broker dealers, there’s really that sense of community, there’s a lot of sharing, kind of a mutual uplifting, if you will.

Micah Shilanski:  Yeah. There’s also limited training that goes on. Now limited, right, but they also have some training. They do compliance. And this does get overblown just to be fair, right? Overblown in saying it’s so much that you can’t possibly do it on your own. We’re going to talk about solutions to that. But the compliance is something they take care of. Now, often we hide, and Jarvis you mentioned this earlier about taking ownership, right, We hide behind compliance as an excuse for our lack of success. If only I was able to use Instagram, I would be this amazing advisor that was out there and everybody would work with me. And really that’s just whining about it. So you can’t blame your BD for the compliance rules. They are what they are. You chose to be in this profession. Either follow the rules with your BD or go be an RIA, go be a BD somewhere else, right? These are your choices, but stop complaining about it. That can’t be an excuse for you not to be successful. But compliance can be a pro.

Matthew Jarvis:   A quick note on compliance, if you’re with a broker dealer, right, the compliance department is not your enemy. And if you treat them as your enemy, they will treat you as their enemy. So again, we’ll run into broker dealer, or excuse me, advisors that will say Matt, Micah, I wanted to use the guardrails. I wanted to use this value add, and my compliance department said, no. And what a bunch of dirty guys, those are. So wait a second, stop right now. Go back to your compliance department, thank them, and this is sincere, thank them for helping you stay out of trouble. Thank them for helping you be compliant and just say, hey, what could I do to make this complaint? How can we work together to find a solution that works.

Micah Shilanski:  Yes.

Matthew Jarvis:   Right, if you go to them as an enemy, again, they’re going to treat you as an enemy. If you go to them as a friend, they may still treat you as an enemy, but at least you’re going to make progress. And again, this is a classic extreme ownership scenario. If I’m blaming someone else, I have no power there.

Micah Shilanski:  I’ve been with multiple BDs, I have never had one that I could not work with the compliance in.

Matthew Jarvis:   Nope.

Micah Shilanski:  Right? Again, you get more flies with honey than you do with vinegar. Same thing you got going on here. Yes, you’re paying them, blah, blah, blah, blah, blah, that’s not the point. The point is to run a successful firm. So yeah, get them on your side.

Matthew Jarvis:   One other thing on compliance, broker dealers will help you establish very good habits for compliance, right, because they’re reviewing all of your stuff. They’re making sure that you’re keeping notes and keeping records. So they are very good at helping you establish habits of compliance. But that’s kind of the end of my list, Micah.

Micah Shilanski:  Yep. So there’s some good things. We want to highlight those. Now let’s kind of transition to a little bit where BDs can fail. Not from the failure of a broker dealer, right, but where they fail you-

Matthew Jarvis:   That does also happen, by the way.

Micah Shilanski:  That’s true. Right.

Matthew Jarvis:   Pauline, my office manager, she worked for a broker dealer that collapsed-

Micah Shilanski:  That’s right.

Matthew Jarvis:   And it took down all of the advisors. Now they all have blemishes because of some mistakes that were made there. So that can happen.

Micah Shilanski:  Yep. So let’s talk about the transition. Let’s talk about why an RIA space could be a wonderful opportunity for you. You can join other RIAs, you can start your own RIA. And then we’re going to talk about a little bit of Matt and I’s journey into this as well. How did we make that transition? And we transitioned in a pretty short time, like I said, we just finished up this live 2020 event, which is just amazing. We had some phenomenal advisors that was there. And when we were doing the extreme accountability, one of them was talking about changing BDs, but they were saying it’s going to take years in order to do this massive change. And I think we did our BD changed about three to four months from BD to RIA. So it’s totally possible in a quick amount of time.

Matthew Jarvis:   Well, so we did our BD to BD change in three to four months. We did our BD to IAR change in three to four months. And then we did our IAR to RIA in three months. And then we did our RIA to RIA only in about three months. So not only have we done it in three months, we did it five different times in three months. I just have a slow learner on—

Micah Shilanski:  Just for pain and suffering.

Matthew Jarvis:   Just for pain and suffering. So yes, it definitely can be done. So I think Micah, one of the first steps in this, advisors, I’m always shocked advisors have no idea how much they’re paying their broker dealer, right?

Micah Shilanski:  Oh, that’s a great point.

Matthew Jarvis:   And so this is the first part of the equation, right? We talk about what are you delivering and what are you charging? Right, that’s this equation here. And so Micah, you and I have talked to advisors all the time who don’t know how much they’re paying. They’ll say, oh, I’m at a 93% grid payout, whatever that means. We say, wait a second. So for every dollar that’s taken out of the client account, after all expenses and fees and stuff, you get 93 cents. They’re like, well, not exactly. There’s some trading fees, there’s some platform fees, there’s some 12b-1 fees the broker dealer keeps. There’s some E&O insurance, there’s this, there’s that, this that. So then we do the math, and again, an advisor, we’ll call them Dave, that was at our live event. We did the math, he was paying his broker dealer $100,000 a year in fees, right? Again, this is the difference between what the client’s paying and what the advisor receives. 100 grand a year. So we said, “Dave, what are you getting for $100,000 a year in this relationship?”

Micah Shilanski:  And this was not a million dollar or multi-million dollar advisor, by the way.

Matthew Jarvis:   No.

Micah Shilanski:  Just to be clear, right? This is at a couple hundred thousand dollars of production, several hundred thousand dollars you are going to be paying, you could be paying a hundred thousand dollars plus in fees. So Jarvis, that was such a great insight. What’s the cost? And then now that’s your budget, right? If you wanted to move to an RIA space, you know you can at least have $100,000 of spend because you’re spending it right now. And the reality is it won’t cost you that much in an RiA space.

Matthew Jarvis:   That’s right. So let’s look at what those costs are in round numbers. And again, these are going to be different for each firm. When we help advisors leave broker dealers, we look at this. And Micah, you and I looked at this ourselves line by line. So what are the things the broker dealer are providing that you would have to replace? Some broker dealers are providing technology. Though hopefully they’re not doing proprietary technology anymore. That stuff kind of faded away, right? So Redtail is going to cost you nothing, right, or very little.

Micah Shilanski:  Oh, come on. 100 bucks a month. It’s pretty expensive.

Matthew Jarvis:   Okay. So it’s 100 bucks a month our of a hundred grand budget. Compliance, right? So you could go to an NRS, an RIA in a box, a Lexington, right? You can go to a full blown law firm and for five to 10 grand a year, get white glove service. 20 grand if you want to have them come out to your office all the time.

Micah Shilanski:  Yeah.

Matthew Jarvis:   There’s compliance. E&O insurance, well you’re already writing your broker dealer a check for the E&O. They’re not covering that. Your E&O is probably going to be less on the outside.

Micah Shilanski:  Ours was.

Matthew Jarvis:   Not substantially less, but less still.

Micah Shilanski:  Yeah. But use the same figure just to make math simple. Use the same figure. So it’s probably not going to be more. Yep.

Matthew Jarvis:   Okay, so we’ve taken our a hundred grand budget. We’ve knocked off what, Micah, 25,000 of it? So we’re still at 75,000? Call it 30. So for Dave, and again, we walked through this with Dave, he’s going to pick up $70,000 a year, at least, by leaving his broker dealer. So we say, all right, what else is the broker dealer providing that’s worth $70,000 a year. And what was, Dave had one other thing on his list. And I want to tread a little bit carefully here.

Micah Shilanski:  Right. Well, the other thing I would say is really important is the custodial thing because this is what’s so wrapped up about this, right? What custodian am I going to move to? My point of view, right, there’s three to choose from, Schwab, TD, or Fidelity. Next.

Matthew Jarvis:   Yep.

Micah Shilanski:  They’re the three biggest ones that are kind of out there. They do a great job in the RIA space. Yes, there’s other ones. But if you start looking at this like, look, there’s 50 million health insurance plans, how do I choose each plan every single year? You’re going to spend so much time. What are the three best options, right? Same thing on the BD space. What are our three best options that you should have. And awesome, go ahead and look at those three options. Schwab, Fidelity, and TD, which is really, TD is now just kind of is Schwab—

Matthew Jarvis:   There you go.

Micah Shilanski:  Pick one and move on. Neither one is going to be bad. Neither one is going to be perfect. They both have issues.

Matthew Jarvis:   Mm-hmm (affirmative). And Micah, you’re on the Schwab platform. I’m on the Fidelity platform. Again, they both have pros and cons. If I were leaving a broker dealer, if I were already on a platform, so like when I left my broker dealer, we were already on Fidelity. So I stayed at Fidelity.

Micah Shilanski:  Perfect.

Matthew Jarvis:   I made it an easy thing. I still shopped the other ones, right? You’re going to want to shop all of them. And whatever pricing they give you is negotiable. So don’t necessarily take their first offer. This again, by the way, is why it’s so important to know other advisors who have done this successfully because you can say, hey Micah, what pricing did you get from Schwab? No, I’m not going to put this on the podcast because I don’t want to get in trouble from Schwab or Fidelity. But if you give me a call and say, Matthew, tell me your Fidelity pricing, I’m probably going to tell you. Now a quick note here before I get a hundred calls, if you’re a BackStage Pass member, call me and I’ll tell you that. If you’re not a BackStage Pass member, send me a check for a thousand bucks and I’ll respond to that, right?

Micah Shilanski:  Yeah. So talk to other advisors. And that’s where forums could be really, really helpful. Again, selfish plug for the BackStage Pass. This is where it’s really helpful. We have several guys making this transition this year and they need a safe space, I hate using that term. They need a place that they could go and talk, not worry about what their BD is going to see and hear, and get terminated. Now, when we made our transition, and you bring up an interesting point I just want to highlight, Jarvis, when you did your transition from BD to RIA only that was still at Fidelity. So you were able to maintain that same custodian.

Matthew Jarvis:   Correct.

Micah Shilanski:  I was not. I was at a different custodian and had to do repaper everything over to Schwab, and still did it in that three to four month timeline. So we can’t use those things as excuses. Parkinson’s Law, this will take as long as you’re willing to give it. So the shorter that deadline, yep, it’s a little bit more pain when you rip that bandaid off, but then it’s going to work. And guess what, all of our clients came with us. This wasn’t an issue of losing people, losing clients when we made a switch. We had a compelling why, which I think is really important. Any time we’re giving advice and recommendation to a client, there should be a why. Why does it benefit them? We were able to articulate that, they appreciated that, we were able to move on.

Matthew Jarvis:   Yeah. And again, we talked about Dave, he’s got this $70,000 left in his budget. Even if for those three months he hired two or three amazing temps or virtual assistants to help with this, by the way, you don’t need that. Any quality existing team can handle a BD transition. But again, you could bring in a lot of help with that and make it a smooth process.

Micah Shilanski:  Yeah. And then all the other little technology stuff that’s going to come up, like a trading software. That’s going to be a question. That’s an easy technology spend. You could either use the custodian software or you could go get your own. But again, this is a couple thousand dollar thing. This is not a hundred thousand dollars thing. This is not even a tens of thousands of dollar thing. Reporting software, kind of the same thing, right? There’s so many options that are out there that are pretty easy plug and play. You’re going to make mistakes because guess what, we’re human. We make mistakes along the way. So you’re not committing to anything permanently when you’re doing this.

                  The biggest change you want to make is how do I deliver massive value to my clients? How do I switch over to an RIA platform? And then see what you learned along the way. And give yourself, hey, in 12 months, I’m going to re-look at all of my systems, what works, what doesn’t work, and make changes from there, which, oh, by the way, we should be doing anyways, right? You always have to be looking at your systems. What am I overpaying for in and not using? What are systems I’m under utilizing which would be solid value add to my clients, right? These are things we always have to go back and review.

Matthew Jarvis:   Totally. And Micah, you and I, like I said, we’ve both done this and we’ve got a really tight timeline for this. Maybe at some point, we’ll do an entire webinar for the nation. In fact, if you think a webinar would be helpful on this, send us an email to [email protected] [email protected], and let us know that you’d like to see BD transition timeline. I would suggest sending that from your personal email account, not your work one. An important thing about leaving a broker dealer is to not tip your hand. So yeah, [email protected], maybe we’ll do a whole webinar on this timeline that we’ve used successfully.

Micah Shilanski:  Let’s just chat about that real fast, since you brought it up, the not tipping your hand. And I’ll just share my experience and what I did. So basically what happened, and we had a very good, compelling reason why, the clearing firm we were at had a security breach and they handled it very, very poorly, in my personal opinion. It wasn’t anything grave that was there. It was a little bit of client information went to the wrong person, all within clients that was there, but still it makes us look bad and incompetent, right, even though it wasn’t our fault. Called the clients, talked to them, talked to the clearing firm. I was not happy with the response. It pretty much felt like a sit and spin response from them. And so, that’s it? This is the straw that broke the camel’s back.

                  So we made sure our BD knew that we were unhappy with that. We then went out and shopped out different custodians, and we came up with our battle plan. Great. What’s going to happen? If the BD says the same response, what are we going to do, et cetera. And then we kind of outlined everything and said, great, what’s going to be our timeline and our transition?

Matthew Jarvis:   Yeah.

Micah Shilanski:  And then once we had all that outlined, we did go to the BD. We had a good relationship at the top. We wished to be transparent with it. We rolled the dice and said, yep, they could get mad and kind of yank everything out at once. Okay, that could happen theoretically. What are we going to do? We explain what it was. They were understanding. They were not thrilled that we were leaving. They were understanding. We outlined everything. And guess what, they were pretty cooperative in the transfer of things. Now I’ve heard horror stories on the other side. So again, this is a bit of your relationship and how big your BD is. But come up with your plan, Jarvis, just as you said, right? What’s your plan. Don’t tip that hat, your hand until you’re ready to make that move.

Matthew Jarvis:   100%. And then it’s a matter of just, it’s really very similar to doing a fee increase, right? It’s about outlining a timeline. Here’s where we’re going to give clients an idea what’s going on. Here’s when we get paperwork ready. Here’s when we’re going to send it out physically or digitally. Here’s when we’re going to follow up. Here’s the drop dead date, all of these things. They all go in there as a timeline,

Micah Shilanski:  And the other thing I want to bring up that I think gets missed on the RIA side when people switch, well, before I do that, Jarvis, have you ever had anyone that moved from a BD to an RIA and regretted it? And said, this was a bad move. I should never have done this. And didn’t want to go sell out and sell their business to somebody else, right, for a five X. Have you ever talked to an advisor that regretted that decision?

Matthew Jarvis:   No, I haven’t. And I’ve talked to dozens, possibly hundreds, probably hundreds actually, of advisors who have made that transition between the two of us. Like I said, I only know one that went back and that was because he took a real big buyout offer, and that’s a discussion for another day, but that’s it. I guess if I could turn this a little bit further, what do we hear from the hundred advisors that don’t make the change? Right, who say, I can’t make the change.

                  Two big ones come to mind. They say, well, I don’t know how I’m going to handle compliance because the broker dealer is taking care of my compliance. Newsflash for you, that’s very limited. They’re going to throw you under the bus as soon as it arrives. You can do it for a lot less somewhere else. The reason number two advisors tell me they can’t leave their broker dealer is that they have tons of trails. When we left our broker dealer, we had $100,000 a year in trails that we needed to figure out a solution for, and we did. We can talk about that in a webinar. But again, how long are you going to let that tail wag the dog, right? How long are you going to say, I’m not going to make this change because of this revenue I’m giving up?

Micah Shilanski:  Right, and for us, a big part of it was, too, not just the revenue we were giving up, it was the direction of our firm. What we want to do, how we wanted to interface with our client wasn’t exactly in line with the way the BD did. We were starting to have some conflicting, not gravely, just to be clear, but some conflicting views on how things should be set up. Which again, it just wasn’t a good fit. The number one thing I hear from RIAs that have made this transition is, why did I wait so long? Seriously, right? No, we’re not getting paid, by the way, if you move to an RIA or you stay at a BD. Don’t care, it’s your practice, run it. We’re just going to tell you what we hear from the field and what we have lived doing this.

Matthew Jarvis:   Yeah, 100%. I had set a goal early in my career. I said, hey, when I get to 50 million in assets, for some reason, that was my number, that’s when I’m going to form my own RIA. And it was really just a forcing mechanism for me to get over my own head trash. So once we hit 50 million, I actually went to the IAR that we were with at the time and I said, “Hey, I want to renegotiate pricing to a flat fee. Otherwise, I’m going to form my own RIA.” Again, I had that relationship where I could do that. And the guy says to me, he says, “Well, I’m not going to renegotiate pricing, but we’ve been friends for so long I don’t think you’re actually going to leave.”

                  And that, by the way, floored me. I was so angry by that. I’m like, we’re friends. And by the way, we hear this from advisors. I can’t leave my broker dealer because we’re like family. Well, newsflash for you, you don’t pay your family $100,000 a year to hang out with you. That’s a different kind of relationship that we’re not going to mention in polite company. But if you’re paying someone to spend time with you, that means something else. Right, so again, separate those things out.

Micah Shilanski:  The other thing I’ve heard from time to time with people is their due diligence trips. I’m going to give up these due diligence trips. I’m going to give up these events and these conferences. I could see that some people plan their vacations around it and do this, and that’s not a lifestyle that I’ve chosen. But here, easy solution, good, if that’s your concern, perfect. Let’s take this budget of this extra $70,000 we have, let’s just take 10% of that extra money. Just 10%. That’s $7,000 for quick math, in every single year use that for your own due diligence and production trip and go wherever you want to go. Right?

Matthew Jarvis:   Or give it to a travel agent, right? If you’re like, ah, I liked it, they decided it for me. Perfect. Call a travel agent. Say I got 10 grand, book me a vacation and surprise me.

Micah Shilanski:  Yep. Done. If you want some ideas, here’s what my BD was doing. Here’s the events they had planned. I like this type of stuff. Go get me something similar. Done.

Matthew Jarvis:   Great news. We can get as many wholesalers as you’d like to meet you wherever you’re at and give you their product pitch. If you were really looking forward to that, I’m sure we could find some wholesalers you can bring in.

Micah Shilanski:  There you go. Perfect. So we talked about, like a lot of these other things, really it boils down to head trash, right?

Matthew Jarvis:   It does.

Micah Shilanski:  And I would say, make this a business decision because this is where it belongs. Now, one of the things I cannot stand is people say, well, it’s not personal, it’s business. That expression just bothers the crap out of me because business is personal, right? Because it is about relationships and how we work with clients is a relationship business that’s going to be there. They don’t want an automated online robo to do everything. They want a personal connection with someone to help guide them. That’s the reason they’re hiring you as an individual advisor. So it is personal, but it is still business. And we got to look and say, great, for the value in which we’re paying are we getting that? And if you are, and if you’re at a BD that is crushing it and delivering so much value, rock on. Please email me, I’d love to know who they are. Absolutely, I think that would be outstanding to stay there.

                  But this should be the same question we pose to our clients all the time. And Jarvis, you and I talk about this because our fees on average higher than most other RIAs. Lower than BDs, but higher than RIAs, right? And one of the things that we often tell our clients, is say, look, give it a shot. The minute you do not feel there’s value, bring it up to us and one of two things will happen. Number one, we’ll be able to fix it and we can deliver that value. Or we’re going to part ways as friends. Either one of those is a fully acceptable solution. And guess what, your relationship with your BD or any other vendor should be 100% the same way. Are they delivering value for the fee in which you’re paying?

Matthew Jarvis:   Totally, totally. Now, when we went through this all with Dave and our Mastermind, he says, “Guys, that makes sense to me. I get it. I get the numbers. The math all adds up. Let me go, and for the next eight months, I’m going to decide if this is the right move. So give me eight months, and I’ll decide if I should leave my broker dealer or not.” And we said, “No, Dave, that’s, no. You don’t need eight months.” And this again, goes to everyone listening that’s with a broker dealer. I give you between now, and Micah, we say the end of this quarter to do a full proposal, the full math on what it would take you to leave. Get a compliance firm, get technology, get all these things. Micah is choking on his coffee right now. He’s like, a full quarter. That’s ridiculous.

Micah Shilanski:  A full quarter. That’s a month at best to come up, I thought you said you were going to make a plan to leave and the whole nine yards, not to think about it. No. Oh my heavens.

Matthew Jarvis:   We’ll give you till the end of this month. Then get some access. It’s 2021, I assume we’re still in COVID, right, we record these a couple of weeks early. Then sit down this month, make an entire plan for how to leave your broker dealer, and then make an educated and informed decision. Either you say, wow, my broker dealer is really doing a great job for me. Or you look and say, I don’t need to pay $70,000 a year for friendship. I can do that other ways. And then once you’ve made that decision, you can then set a date and say, all right, here’s what I’m going to do this. So maybe you’ll wait three or six or nine months before you pull the trigger. That’s fine. It’s got to fit in your calendar. But by the end of January, by January 31st, you need to be emailing [email protected] saying, I’m leaving my broker dealer. Congratulations. Or I’ve found, to Micah’s point, an amazing broker dealer and I’m staying here again. Again congratulations.

Micah Shilanski:  Rock on, yeah. So let’s outline this a little bit more just to make it easy, right? These podcasts come out on Monday, take every Friday afternoon, Friday off and make this decision, right? Now, it shouldn’t take all day. This should be a couple hours on every Friday. The first Friday, I’m just spit balling this, we didn’t outline it in advance. The first Friday, how much are you really paying? What’s your EOC for last, right? How much was debited from your client account and went into your personal bank account, right? That number, which is there, because then you’re going to find out how much you’re actually paying.

Matthew Jarvis:   Yes.

Micah Shilanski:  Sweet, now you know your budget that’s going to be there. Next thing, make a list of the vendors of what your BD does. Re-listen to this podcast. We kind of talked about it, right? It’s compliance, it’s technology, it’s clearing, it’s trading, CRMs, whatever those are, make a list of them, then go find them. And guess what, they’re super easy. Jump on XYPN’s website. They have a list of all of these vendors that are out there and go look at their pricing that can be there. So that’s the second week. The third week, make a decision on what platform you’re going to choose. Don’t worry, it will be the wrong one. And you’re going to learn how to do it better next time. That’s not the point. It’s going to be better than where you’re at. That’s only three weeks into it and you’ve made a full determination whether it makes sense to stay or go at your BD.

Matthew Jarvis:   That’s right. And by week four, you weigh those out, pros and cons, pull the trigger. Now you will get stuck in places. To get into Micah’s point, you’ll probably pick the wrong custodian because there is no right custodian, for the record. That’s where you need to find advisers who have done this. Not consultants, not experts, not people who heard a good idea. Talk to advisors who have done this. Now if you have an advisor who’s left your broker dealer that you know, that’s your number one contact. If you don’t, then reach out to guys like Micah and I, [email protected] The BackStage Pass, we have a lot of members who are at broker dealers, who have left broker dealers, who are in the process of it, right? Find those advisors with whom you can speak and say, what actually happened when you did this.

Micah Shilanski:  Amen. Go through those steps, right? We hired an attorney to go through a separate attorney to review everything that we were doing just to say, hey, we don’t want to make any big legal mistakes. And yep, that was a few thousand dollars. But guess what, out of my hundred grand budget, and ours was bigger, right? But out of that hundred grand budget, just in this example, there’s still money that’s leftover. And it gave us a little bit of that peace of mind making the transition because now someone else was reviewing it. That’s okay to do, right? It’s okay to get that outside help because it checks off those boxes.

Matthew Jarvis:   Yeah, 100%. One last rant on this and we can jump into some action items. Sometimes advisors will say, well, maybe my number’s not a hundred grand, maybe it’s 30. I doubt that, but let’s say it’s 30. And they say, it’s really not that big of a deal. It is that big of a deal. Imagine if you met a client and you look through their expenses and they said, well, hey Matthew, every year I throw away $30,000. You’d say, that’s insane. Why are you throwing away $30,000? Well, I just want to do anything about it. You have an obligation to yourself, to your family, most importantly to your clients to operate in the most efficient manner possible, right? This is how we deliver massive value. Imagine the value you can deliver to your family, to your clients, to your team if you have that extra 30, 80, 100, 200, $500,000, whatever your number is.

Micah Shilanski:  Okay. Let’s transition to action items because in addition to his podcasts being all about rants, it is about action items. So we do want to make sure we get to these. Number one, we’ve already kind of mentioned it, get your plan together. We did outline a three week strategy for you. Get that together this month. No, not next month. No, not next year. If this is something that you’ve been thinking about, do the analysis now, then you’re able to make a decision. Either shut up and continue with the BD or shut up and make a change, right? But at least get your plan together.

Matthew Jarvis:   100%. Now for our RIAs, people who have already left broker dealers, I’m sort of curious why you stayed on the podcast this long, but thanks for being with us. Go back through this month, use those same weeks that Micah outlined and evaluate all your current vendors. So just because you’ve been on one platform for years is not a reason to not look around or even to go back and price them again. So for example, we had a big technology vendor. We found out from another advisor they were paying substantially less for that same technology. Again, a reason to have Masterminds. We were able to negotiate thousands of dollars off of our vendor costs by going back and saying, hey, we’re thinking about making a change. Is this really the best deal you can offer us?

Micah Shilanski:  Perfect. Number three, everyone should be doing this one, determine your EBOC, right?

Matthew Jarvis:   Mm-hmm (affirmative).

Micah Shilanski:  Now, Jarvis, you and I use this in such casual terms now, but there’s still a decent amount of people that don’t really understand what earnings before owner’s comp is. And the definition for you and I is, what is the gross, what is the total amount of fees that have been debited from our client’s account compared to what shows up on our personal tax returns plus retirement contributions. So we’ll add those back, right? That’s what we’re determining is what our EBOC is. Keep it very simple because every platform can be different, blah, blah, blah, blah, blah. But then this gives us a very honest look at what it should be. And after expenses, again, mine is in the high sixties. It was in the seventies, it dropped down a little bit. This year we had some bigger expenses. I’m about 68 for 2020 is where it’s going to come in, which I’m pretty happy at with a total EBOC. You should be north of 50. That’s one of the bars that we’re going to shoot for.

Matthew Jarvis:   Yeah, that’s where I stay, in the mid-fifties currently. Some day I’ll beat you on this one. We’ll do an entire webinar, not webinar, entire podcast on EBOC because there’s a lot of confusion. Advisors say, well, I keep my kids on the payroll. Eh, move past these shenanigans, right? This is about brass tax here.

Micah Shilanski:  Amen.

Matthew Jarvis:   Actually I have number four, email the [email protected] if you’d like us to do more podcasts on this topic or even an entire webinar. [email protected], and we’ll cover more information on the leaving your broker dealer.

Micah Shilanski:  Yes, absolutely. And share, right? Our reviews are growing, which is great. So vote early, vote often. Those five stars are absolutely amazing. And share on Twitter, on Facebook. Get this message out to more advisors so they can help improve their practice.

Matthew Jarvis:   That’s right. Perfect. Well, thank you so much for listening and until next time, happy planning.

Micah Shilanski:  Happy planning.


Hold on before we go. Something that you need to know. This isn’t tax, legal, or investment advice. That isn’t our intent. Information designed to change lives. Financial planning can make you thrive. Start today. Don’t think twice. Be a better husband, father, mother, and wife. The Perfect RIA. The Perfect RIA.

Share the love!