How Mike McNamara became a TD Ameritrade RIA and pruned his book in one move
The former Commonwealth advisor also had goals related to succession, compliance and a bigger bottom line
4 min read- McNamara transitioned to a TD Ameritrade RIA to shed unprofitable commission-based clients.
- Commonwealth helped McNamara sell his commission-based book to a younger advisor.
- McNamara sought a custodian with a culture similar to Commonwealth, choosing TD Ameritrade.
- Orion's CEO notes advisors with 600+ accounts often benefit from switching technology platforms.
Mike McNamara lists several familiar reasons for leaving life as an IAR with a top independent broker-dealer – and one less usual one.
The president of McNamara Financial Services, which now manages about $250 million of assets from Marshfield, Mass., says he worried about being a broker under Dodd-Frank financial reform and figured that he could reconfigure a more profitable platform outside the broker-dealer.
Those are pretty typical reasons for leaving a broker-dealer. What makes McNamara different is that he was also looking for splitsville with 451 of his unprofitable, commission-based clients.
Already about 85% fee-based, he wanted to make it unanimous. Yet the prospect of having individual break-ups with $40-$50 million worth of clients — not to mention that much coffee with that many people — was strong incentive to look at doing a wholesale break-up.
Pulling the plug
“It’s a really hard thing to do but when I thought about pulling the plug (on continuing to do commission business), it became an easy thing to do,” he said. “I upgraded my book in one fell swoop.”
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McNamara has nothing bad to say about Commonwealth Financial Network. He had been one of its stars since 1980 and still misses the old mother ship – just felt he had outgrown it.
Commonwealth helped McNamara, 62, sell the book to a younger advisor who prefers commission-based business.
Commonwealth wins its fair share of business — and accepts occasional losses, according to Emily Guadagnoli, a spokeswoman for the Waltham, Mass.-based firm.
Wish them well
“Some advisors leave for various reasons over time and we wish them well. Given that we have recruited more fee-based production over any time period you’d like to measure we’re confident that our value proposition is very, very strong.” See: Cambridge, Commonwealth see reverse breakaways due to compliance fears.
The transition was relatively smooth, in part because he had already brought almost all functions in-house with the exception of website maintenance, compliance and performance reporting. McNamara has three advisors and three staff support people on his team in addition to himself.
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“I managed to replace those services for a whole lot less and the numbers were staggering,” he says. Commonwealth recently reduced how much it charges advisors to be more competitive for big advisors like McNamara. See: Commonwealth raises payouts for big advisors and slashes trading commissions.
For asset custodians, he looked at LPL Financial, Schwab Advisor Services and Pershing Advisor Solutions in addition to TD. He crossed LPL off the list first because he couldn’t distinguish it economically from Commonwealth.
“LPL was virtually no different,” he says. “And LPL encourages you to use all the proprietary software.”
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McNamara used Orion Advisor Services, LLC for the portfolio accounting and performance reporting software and Redtail Technology for CRM software.
Eric Clarke, CEO of Orion, says he has tremendous respect for Commonwealth technology and culture but that there are good reasons for some advisors to make the switch.
Just not a fit
“What Commonwealth has built truly is a great technology; it’s just not a fit for all advisors they’re working with.”
Firms tend to fit Orion, he adds, when they have 600 accounts or more, have multiple advisors and locations within one firm and have a need to customize their performance reporting. McNamara has more than 1,000 accounts.
Commonwealth takes the high road when one of its advisors chooses to leave. “They’re willing to give (account data) and be helpful rather than go to battle,” Clarke says.
Schwab and Pershing were contenders but McNamara said he felt that that TD culture more closely approximated what he liked so much about Commonwealth. And many of the advisors at TD conferences felt more like peers than the people at Commonwealth.
“There were a lot more people who look a lot more like me at TD. I’m thrilled at the people I’m rubbing elbows with this year.” McNamara anticipates participating in the TD Ameritrade Elite Advisor Summit in Miami this year. For information on last year’s event, see: TD Ameritrade is pulling out the stops for 100 advisors in Laguna Beach
Bigger fish
“I felt like I was a bigger fish in the TD pond than anywhere else.”
There was also one more big reason that he wanted to become an RIA as opposed to remaining an IAR under an IBD. His son Justin, daughter, Alyssa and son-in-law, Kirk, are his three partners. He has a succession plan in mind that will pass the business to them.
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