Brooke’s Note: There is a growing consensus that the RIA model — all things equal — is the better way to go for many advisors and many clients. Yet most would agree that all things aren’t equal. Here is the story of an advisor making a move on behalf of himself and clients who has no use for the fee-based model — making him an anomaly even among brokers.
David Lucas was still working as a broker for Wells Fargo when one of the company’s salespeople made a move he didn’t approve of. As part of routine cold calling to find buyers of mortgage products, the sales department reached out to his wife, he says.
“They … said: Your husband told us to get in touch with you.”
End of the line
That call – which he had not solicited, he said – was the final straw.
The San Jose, Calif.-based broker with $100 million in client assets and $800,000 of production left the banking and brokerage conglomerate to join Raymond James & Associates in January. The St. Petersburg, Fla.-based brokerage company reported the defection on Wednesday. His assistant, Denise Book-Hernandez, followed him in the literal cross-the-street move.
He didn’t give the RIA model even a cursory glance because all his business is done as transactions.
“I’m something of a dinosaur because I’m a commission guy,” he says.
Lucas says he prefers a sales structure over a fee-based one and he believes that his clients benefit. Commission brokers have two extra incentives to talk to clients. They need to communicate with them to drum up business and they need to talk to them also to get them to approve transactions. Though discretionary managers argue that this can be inefficient and gives incentive to do superfluous transactions, Lucas believes pay-as-you-go is fair to clients and the extra communications are important. “I know the names of all my clients’ dogs,” he says.
Less time for golf
“My clients don’t have to pay me anything unless I do something. (The issue with fee-based advisors) is that they get clients and don’t look back. I don’t play as much golf.”
When he was planning his move, he didn’t give much consideration to a big check Morgan Stanley was willing to pay him. He doesn’t want to hazard another big company’s bureaucracy where he might not be able to make things happen quickly for clients. “I definitely left money on the table,” he says.
Lucas, 58, just wanted to continue doing business in a brokerage atmosphere more similar to that he had for many years as a broker for A.G. Edwards – before it was swallowed by Wachovia, which in turn was gobbled by Wells Fargo. The culture at Wells Fargo continued to feel more and more bank-like to Lucas.
The point was driven home to him when his wife got the call from Wells Fargo trying to sell her mortgage products.
Wells Fargo, deeper issues
“I think Wells Fargo may have some deeper issues. If you get that big, it’s hard. I don’t think cross-selling is going to work. They call it cross-selling but it’s really pestering.”
Wells Fargo did not respond to request for comment.
Elliot Weissbluth, CEO of HighTower, whose company is constantly recruiting breakaway brokers, said in an earlier interview, that this is becoming one of the more common complaints he hears.
“The 'Bank’ of Merrill Lynch, UBS, Wells Fargo and Morgan Stanley are driving products and that’s creating tension with financial advisors who see themselves as financial advisors.”
For another Silicon Valley-based broker who left both Merrill Lynch and Wells Fargo (the Finet program) and Merrill Lynch again, see: Why one Merrill Lynch advisor needed to break away twice to become an RIA.
Scott Curtis, senior vice president of the Private Client Group of Raymond James & Associates, says that Lucas’ recruitment fits a pattern.
“Our advisor-centric culture and broad platform continues to attract some of the very best advisors in the industry.”
Raymond James also supports IBD reps and RIAs. See: Raymond James shows it’s serious about winning bigger RIAs
Lucas says that Wells Fargo also caught him at a time of life where he’s looking to shed excess baggage. His son started a website thefoodee.com advocating a diet similar to what our primal ancestors consumed.
“I’m his guinea pig and I lost 30 pounds.”
For other breakaway stories, see the RIABiz Breakaway section.