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Brainstorming My Niche (Part 1)

It’s no secret that I am interested in managing wealth for others. The next few blog posts will review some interesting conversations I have recently had along with some related writings that could be pushing me in that direction.

On October 31, 2017, I called and spoke with a recruiter for Edward Jones (EJ). As an EJ financial adviser, my job would be to move clients into products managed centrally by their dedicated investment team. I would also do extensive financial planning (e.g. budgeting, retirement and estate planning, asset protection) for clients.

I never believed that I would be a good fit as an EJ adviser and this was quickly confirmed. First, EJ is “very conservative” and derivatives are therefore not used (I disagree with the claim that options are more risky). Second, I would only be permitted to continue managing my own account per EJ guidelines. Third, rather than concentrating on planning, which is where I believe financial advisers excel, I want to stick with my area of expertise: maximizing investment performance.

Although the phone conversation lasted only 10 minutes, he did give me some ideas for further consideration. He suggested I reach out to some independent advisers affiliated with Raymond James or LPL Financial with the following pitch: “my background is in trading options and I’m pretty good at it. Could we sit down and have breakfast/lunch to talk about what I do and what I’m looking for?” He suggested they might compensate me with a percentage (e.g. similar to this).

I ended the call thinking a niche just might exist for someone like me to trade for the big firms (LPL Financial is #1 in total revenue from 1996-2017 according to Financial Planning magazine). Eager to confirm, I immediately contacted an LPL recruiter who told me they outsource investing to third-party asset managers (TPAMs).

“What does it take to become a TPAM for LPL?”

“About $40,000 to get an AIM-R compliant track record,” he said with a chuckle.

His information was a bit dated; he was talking about Global Investment Performance Standards (GIPS).

I ended the phone call somewhat shocked at the cost. $40K might be enough to start my own IA or launch a fund. Why would I want to undertake the expense to become GIPS compliant with no guarantee of business thereafter? It seemed like I might be headed toward another dead end.

I will continue next time.