[00:00:01] Speaker A: Hello and welcome, everyone. I'm Taylor Pankratz, and this is behind the breakaway. Together with my co host, Jason Barber, this show takes you behind the scenes of leaving your captive broker dealer firm and explores the world of RIA independence.
[00:00:20] Speaker B: All opinions expressed on the podcast by the hosts and guests are solely their own opinions and do not reflect the opinion of uptick partners. This podcast is for educational purposes only and is not legal advice and should not be relied upon as a basis for any decisions.
[00:00:41] Speaker A: All right, we are back with episode twelve, podcast number twelve. We got Taylor here, we got Jason in the studio, and today we're going to talk about do I need a big back office? When I'm leaving my captive broker dealer and looking for an RIA, do I need to find one with a big back office? What does the back office even do? In the RA world? The back office does a little bit different things, provides a different service than the broker dealer back office. And we're going to just talk about that and give some clarity onto. We hear people all the time that call us or they email us and go, do I need a big back office? Do I even need that? If I'm going to either start my own RIA or join an existing RIA? What is the role of the back office? Office? I see some people have one, some people don't. Do I need one? All those things? So that's what today's podcast is going to be about. Spend to start it off. The first question is maybe let's paint a picture from our experience of what the back office was doing when we were at our broker dealer, what we saw, their role and maybe how that's different than what a back office is to us today in the RA space.
[00:01:49] Speaker C: I think that thinking back on it this morning about what were the things when we picked up the phone and we called the home office, as we called it, what were we typically calling them about?
It seems to me that most of the time it was either something to do with trades, there was a trade error, or this trade didn't get done, or whatever it may be. That was pretty rare, of course, but there might have been something to do with trade. Most of the time, I think it was money movement. Hey, I'm trying to move money from this account to this account. Help me do that. What do I need to do? Can you push that through? I need to get urgent. Can I get that? Can I get that through? And really, I think by and large, like that was it periodically, and it would be probably more so a support person in the office would be calling about marketing questions or compliance questions or technology. Hey, I've got a technology problem. Something's not working in the office.
HR questions, et cetera. And that, I think, is really the big kind of thing to wrap your mind around when you break away from that, is that you're dividing up.
That's what you've got. I guess if you want to look at it as, depending on your perspective, you look at it either in a positive light or a negative light, you would say, well, at the big box broker dealer, all that stuff is like one phone number. You know, you call one phone number and then, you know, you've got a different person every time. Different department. All these different departments. And they basically just bring it all together in one house.
Whereas when you break away into the RA space, your back office is still doing a lot of the same functions. Typically, these, these organizations are, are, what's the record? They're, they're segregated. There's like a chinese wall between the compliance department and the custodian, for example, right? Whereas the custodian or the broker dealer in that space is doing all of these things. The compliance department and the custodian are one.
[00:04:01] Speaker A: They are in the captive broker dealer space.
[00:04:03] Speaker C: In the captive broker dealer space, right? Because the compliance and the custodian are one team. The technology and the custodian are the same organization. All these things are all one entity, okay? Versus you break away, and then what you do is you say, the custodian is the custodian.
So if I'm calling the custodian, what am I calling them about? I'm calling them because I've got a trade issue, or I'm calling them because I need to move money, or I'm calling them because I've got a question about paperwork or something to that effect. But at the end of the day, that's what the custodian's job is. It's almost just thinking of it like, is it Nick Saban that always says, do your job, focus on your job. You just basically dividing this up to say, the custodian's job is this paperwork, moving money, placing trades, 1099s. That's what they do.
[00:04:56] Speaker A: Keeping the client's money safe, keep the.
[00:04:58] Speaker C: Client'S money safe and make sure that the trades get executed on time.
[00:05:02] Speaker A: Just do your job.
[00:05:02] Speaker C: Just do your job. Like you don't need to be involved in the other stuff because you're not good at that or because there's a conflict of interest and that it's, if you're the custodian and you're holding the money. Like, of course you want to put the clamps on things from a compliance standpoint and be like, wait a second, we got 20,000 people here. We need to have this super strenuous and rigorous compliance program that isn't really actually following the rules as much as to the letter of the law. It's following the. The compliance, or the custodians risk tolerance. Right. Your compliance program is going to be based on their personal risk tolerance, not on your risk tolerance, but on their risk tolerance. So how does that differ from what? So we've talked a little bit about it, but in the RA space, you have all those same functions. Right.
[00:05:48] Speaker A: What's nice about at least where it gets into a little bit of depending on the size of your ra. So if you're out starting it from scratch, it depends on how much money, how much aum you have on where you can even custody your clients money at.
[00:06:07] Speaker C: Right.
[00:06:07] Speaker A: I know at Pershing, there's minimums of maybe three or $400 million that you have to be able to even have a relationship or custody your money. With Pershing, Schwab has notoriously taken the position of. They'll take anybody and everybody. Altruist 2ft in a heartbeat. Altruist again, altruist is actually. You can call them.
[00:06:26] Speaker C: Yeah.
[00:06:26] Speaker A: I would argue altruist is built for the people that have small. Aum.
[00:06:31] Speaker C: Exactly.
[00:06:32] Speaker A: I think Schwab does the full gamut. I think altruist bread and butter is really the smaller advisor.
Yeah. An altruist you can't even call. It's like you have to chatting them. But the.
My point is that depending on the size of the RIA, not so much the individual advisor, but the collective when you call, let's say, pershing. And because they have those account, the RA minimums on who they do business with, they actually give you a kind of a white glove concierge approach. So that you're calling, when you have a trade thing or you have a money movement thing or any type of issue that the custodian needs to handle, you're calling that person, that's your representative at the custodian, and then they're going and prairie dogging. What? How to fix your problem, and they're calling you back on how to fix it. Right. So you're not sitting on hold for an hour being passed around to these different departments. And not every custodian runs like that. And because they're just a different business model.
[00:07:39] Speaker C: Yeah. Depends on how much money you have, too.
[00:07:41] Speaker A: Right. And so, but back to the thing of, well, it depends on how, when you're deciding to break away, do you join an RAA that's established, that has relationships with these different custodians, or do you start your own? That's been the calculus of, okay, how important is it when you're needing back office support at the custodian that you have that white glove feel in concierge level? Or do you want to be chatting, or do you want to be with a rep over the web, or do you want to call somebody and get a different person every time and then get transferred to this department and get transferred back, et cetera. So that goes into the calculus. But I think people would argue that you are paying for that at some level, right? Like altruist is notoriously very inexpensive, but you're not necessarily getting the same level of service as you would at some of these custodians that maybe charge more because they have a different business model, more of a higher end feel.
[00:08:48] Speaker C: So then is there any advantage as far as the custodian is concerned other than the thing we just talked about as far as total assets that you've got with them? But would you say there's any advantage to the actual RIA itself and the size of their, the RIA's back office? If I join a $20 billion RIA or an RIA aggregator of some sort, who's got 50 employees that work for that RA organization, is there any advantage there when it comes to the custodian? And for example, am I going to get better service from the custodian in terms of I can call my back office, my RIA back office and they will move the money for me faster. Right. Or they will fix the trade error that was made or some, is there any, from your perspective there? Am I making sense?
[00:09:45] Speaker A: Yeah, I think it's, what's going to be interesting is maybe there's a conversation there of what's the most efficient way to get the thing done. Because if I'm having to send a note to the back office, the RAA back office of 50 people and try to explain the situation to them, they're going to have to play the telephone game of calling the custodian and explaining it to them. And then nine times out of ten, the client is going to have to probably sign something or do something from the custodians point of view, some paperwork. And so then you're, it's coming back. Right. The telephone game's coming all the way back and by the end of the time you're like, should I have just called my, my one concierge number and just had got it from the horse's mouth type of thing?
[00:10:31] Speaker C: The answer is yes, almost certainly.
[00:10:33] Speaker A: Most certainly that's the case. And I think that typically the functionalities of a large RA aggregator that has 50 employees or the smaller that has a handful, the idea is the same, that the level of service that you're wanting to give these kind of firm plugins that are plugging into your platform, you're wanting to give them a great level of service. It's just are the people in the back office employees or are they contracted out to give you compliance support, marketing support, technology support, doing these things, do they really need to be employed by the RIA? And because typically what we find is that costs money to have 50 employees in the back office sitting there waiting for the phone to ring and where who pays that bill? And a lot of times it's the plugin advisor. They plug in firm that's breaking away.
They want that back office support, but they don't want to pay for it. They definitely don't want to pay a premium for it, but they're under this guise of I had a huge back office when I was at the captive broker dealer, so I feel like I need that. And what we've come to realize, and we thought that, but it turns out what we've come to realize is you need those services, but you don't need the huge back office to make those things happen. And so the cost of doing business in the RA space, or for sure the plug in advisor to the RA platform should considerably come down.
[00:12:16] Speaker C: Yeah. And I'd say let's just think about like marketing, for example. So you're like, okay, we, you know, we've partnered with a third party marketing firm that does an exceptional job for us when it comes to building websites and some social media type things, et cetera. But the reality of the situation too is that no matter what marketing firm, even if we had in house marketing people here, and even if we said, okay, we got in house people and now we've got an advisor that wants to join up tick partners in you name the state, okay.
It depends on what your expectations are for that marketing program and what you're actually, because nobody's take this podcast setup for example, right? There's no firm out there that we could have joined, okay? No up, no aggregation firm, no RA support platform, none of those that are going to come in here and set up this podcast for us and help us figure out how to do this. So at the end of the day, there's some types of things that you're like, okay, if you want to have an extremely 2024 social media presence, really big time video social media presence, et cetera, some of that stuff, you're just going to have to make it happen, right? And figure that out because it's just simply like from economies of scale and just like a presence of local presence, it's going to be hard for that to be anything other than in your exact office. Okay? Whereas, but I think all of the basic, call it the basic marketing type things, the things that you think of as table stakes, like we need to have a great website, we need to have a very robust social media presence, at least in terms of all of the, hey, on Mother's Day, I need to have a really nice thing that comes across on my social media and things of that sort. And you should have and expect resources and support in helping you do a podcast and from people that have actually done it.
[00:14:11] Speaker A: What you're wanting to pay for when you're joining an RA, let's say aggregator, take uptick as an example. You're wanting to make sure that the basics are covered, that you're not going to have to try to figure out the basics. We all know that you want basic marketing. You know, you have to have compliance. You know, you have to have technology support.
You want the printers to work right. You don't want to be sitting there googling, why is my printer not printing cybersecurity? All these things, you know that, these are things that you know you're going to have and you don't want to have to figure it out.
[00:14:42] Speaker C: And that's what your back office, that's.
[00:14:43] Speaker A: What your back office should be doing. And then if you're sitting there going, I want to take it to another level. I want to take, I want to have a podcast, I want to, I want to have a CFO that's coaching me on my, on the business and do all these things.
Those are things that you shouldn't just pay for just because we're making like, oh, of course you want this.
[00:15:06] Speaker C: Exactly.
[00:15:06] Speaker A: And you're gonna pay for it whether you want it or not. No, let's make that kind of an add on thing and not, oh, that's what, that's why we hired ten people in our back office. That's what they do. So you get that. And if you don't want it, I'm sorry, but we're not gonna fire them. So you're gonna pay for it. And it doesn't, it shouldn't be that way. It should be where you're paying for it because you want it. And if you don't want it, you don't pay for it.
[00:15:33] Speaker C: Exactly. We want to be, we want to provide for a very reasonable cost, the essential back office support. And the only real difference is between a call it a very large RIA with $20 billion versus a billion dollar Ria is really just a matter of probably, what phone number are you calling to reach your marketing people? Are you calling, is it a, is it a, I'm calling this other company who's been contracted by the RA to provide these services, or am I calling the main company? Okay. And there's pros and cons to that, right. I guess maybe if you have one phone number to call, it's maybe a little, perhaps more convenient. But then you could also make the argument of, do you want to have just the marketing that that firm has hired that person and say, I hope that person's good at marketing. Like, how easy is it to change? Because to some extent, it's like the idea of having, hey, these are the marketing people that we have. But guess what? If they aren't doing a good job, we can find a different marketing company. Okay? And so we choose them because they're the best, or we believe that they're the best for the job. Same thing with compliance. And it's like, hey, we've learned our lesson on compliance. We've been through some compliance folks. Let's just say it that way. And, which was another podcast that we need to do is to really dive into the compliance conversation.
[00:16:56] Speaker A: But, and then HR. Yeah, HR is a big thing where the captive broker dealer that you're calling the custodian, effectively the broker dealer, and talking about HR questions and things because they're employing your people. Right. And in the RA space, we take the position, or we think that the advisors that plug in to uptick that they should be employing their people. Right. That the LLC, the John Smith wealth management, that they should be employing the people that are working there so that they can make the hiring and firing decisions.
[00:17:31] Speaker C: That's right.
[00:17:32] Speaker A: That they want to make, they can. They should be able to run their business how they see fit. And so that's, now, obviously, there's experts and there's health benefits and things, people that you can call if you have questions on these things. But it is nice to have that freedom of you. The people that work for you are employed by you. And the back office support is, there's HR back office support, but they're not hiring and firing your people. They're not. Your staff is not employed by, in this case, uptick partners or a large. It still blows my mind that people would actually leave a captive broker dealer and then go get employed by somebody else. Yeah, that's. I'll never understand that for as long as I live.
[00:18:15] Speaker C: I think it's just, unfortunately, it's just miss. They get sold a bill of goods and they just don't understand the industry and the dynamics and the pros and the cons, and they think, oh, my goodness, it's going to be so, like, what? I'm going to have to employ my person and figure out benefits and, and all this stuff that just sounds like such a headache. I'll just have somebody else do that. And then they're not thinking it's, yeah, maybe that's the easy button, but somebody.
[00:18:39] Speaker A: Else can help you do that, but doesn't mean you have to work for them.
[00:18:42] Speaker C: Exactly. It's who has the control is the question. Right? Are you really wanting somebody else to have that control over you? Because we can tell stories all day long of advisors that have had, have run into HR issues with somebody on their organization, and they're in a position where they're like, I would fire this person today except for it takes me a year and a half.
[00:19:00] Speaker A: Yeah, I'm not allowed to fire them.
[00:19:01] Speaker C: I'm not allowed to fire them. Why? Why can't I fire them? Because they don't work for you. And now you're going through. The custodian is over here. We think that there's some liability here, and we might get sued and we might get this and that, and we're just gonna, it's gonna have to be this whole process, and you're gonna have to document all these things. Meanwhile, you run a risk, a very real risk, of somehow there being some type of retaliation or somehow there being some kind of a, guess what? I don't like you either. And now we're gonna. I'm gonna sink the whole entire ship, and you end up getting fired.
[00:19:36] Speaker A: Self sabotage.
[00:19:36] Speaker C: Yeah.
[00:19:37] Speaker A: And so the fact that people would go from that arrangement and go, in fact, I'm gonna leave that. I'm gonna break away. I'm gonna call my clients, I'm gonna do all this heavy lifting, and I'm going to go work for somebody else. I'm gonna go, I'm gonna go be a w two for somebody else. It blows your mind. It's like they tunneled out of the urine. Solitary conference, military confinement. You've tunneled out of solitary confinement, and you tunneled into another jail cell. Not even, like, in the yard. You didn't make it out to the yard. You sure as hell didn't make it to freedom, but you didn't even make it out to the outside. I've left solitary, and now I'm. Oh, my God, I'm in a cell with three other people in here.
[00:20:17] Speaker C: Exactly. It's really. It's shocking, honestly.
[00:20:21] Speaker A: And so you see it all the time. You see all these news articles like, oh, they left Jones and joined this other w two firm, and like, wow, that was.
[00:20:28] Speaker C: That was short sighted.
[00:20:29] Speaker A: That was miscalculation.
[00:20:31] Speaker C: You got sold. You must have really been unhappy to do that, because it's just. It's. There's so many problems that can happen with that. And I think at the end of the day, that goes back to this thesis or this. The ethos of what we're trying to create here with uptick partners is this idea of, we are looking for people that want to be free. They want to be free from soup to nuts, right? They want to be free. They just want a little bit of support to not have to figure out and not have to waste all the money that we've wasted figuring these things out.
[00:21:04] Speaker A: Right.
[00:21:05] Speaker C: Did I not just spend $4,500 yesterday to part ways with our previous compliance people that were terrible, that we didn't.
[00:21:12] Speaker A: Know, and that was like, we used. We weren't even using them for three or four months. And they bill you. Yeah. It's. It really is a. It's an interesting. It's an interesting world or an industry where there's so much unknown information out there that you can't Google or get a straight answer, that until you've done it, looked back and gone. Now all the puzzle pieces start to fit together, and it makes total sense now, but it wasn't two years ago that we would sit down and talk to each other and be like, how does any of this work? What's a tamp? What? How does HR work? How do you get benefits? How do you. What technology do you use? What does integration? What does that even look like or mean? You go on someone's website and you see the demo, and that doesn't mean anything. Or you do a demo with a sales guy. That's even worse.
[00:22:06] Speaker C: Yeah.
[00:22:06] Speaker A: So looking back, there's just so much valuable insight for people that are listening to this podcast, feel free to reach out and go to the website, uptickpartners.com. you can fill out a thing and we'll call you. You can, you can call us. You can text us. What's the number? 9368-0077.
[00:22:27] Speaker C: That's right.
[00:22:27] Speaker A: So 9368-0077 call or text that number. And we want to help.
The advisor that's sitting there has questions like, I would argue that we, we spend, what, 1015 percent of our week just talking to advisors that are asking us questions about specific things that are particular to them because they're thinking about leaving and they have a question or concern about something, and we spend. I just remember I've probably exchanged emails with somebody in, I think they're in Kentucky four or five times so far about just questions that they were having on their breakaway coming up. Breakaway. And we're not even trying to sell them on joining uptick. We just want to help.
[00:23:11] Speaker C: Exactly. Yeah. Because it's not going to always be a fit. It's not going to always be a fit. And I think that's the big difference that we really, we just want to emphasize again of why, if you're thinking about breaking away, why should you call us, regardless of whether or not we end up working together, is because you and I are not salesmen.
[00:23:33] Speaker A: Right.
[00:23:34] Speaker C: We're not salesmen. We've actually done it. And I remember having a conversation not too long ago with an advisor that's about to join uptick partners, and he was telling me about a conversation that he had with another. It was a salesperson at a ra roll up. I don't remember exactly what it was that was said, but I remember saying to him, whatever the thing was that the guy had told him, I said, that sounds like something that I would say if I had never done it before. That's just the reality is that if you've never done it, if you've never actually lived it, it's really hard to fully understand it. And to some extent, you're talking to a salesperson who literally, their job, their compensation probably is based on you saying, yes, okay. And they are, they're trying to recruit 100 people. Okay. Or they're, they're not in this position of, wow, we really need, it really needs to be a great fit.
[00:24:33] Speaker A: They've never found anybody that they didn't want to sell.
[00:24:36] Speaker C: Yeah, exactly. Exactly. It's like the life insurance guy here in town, he's never met anybody who didn't need more life insurance. And so it's the same kind of ideas. There's, every single person they talk to is going to be like, let me just tell you about how great it is and how it's the perfect fit.
[00:24:49] Speaker A: For you, etcetera, as opposed to when people talk to us. I mean, I would say. I would almost argue that it's very hard for it to be a perfect fit with us because we're looking for a specific type of personality and character and compliance, record size of business for it to, for them to be a good fit with us. And not, there's not a ton of those people out there that are a perfect fit. And so that's what we've said all along. We're not trying to build the biggest firm. We're trying to build it with like minded advisors that are wanting to grow and go to a place that they know that they can grow the most. And I would find it. I would find it very hard or said a different way. I can't think of a different place that you could grow more than at. Than here at uptick. Because we are on, I would argue, the cutting edge of what clients are wanting. That's the tax practice. Being in, like in house tax practice, alternative investments that are becoming very popular, like reaching into that kind of normal, average investor vernacular of what's private credit. What are these things I'm seeing? Tony Robbins book just came out. What is this? What are these things?
[00:26:06] Speaker C: You mean I can invest in professional sports teams now? That's a thing. I want to be an owner of the Boston Red Sox.
[00:26:12] Speaker A: Yeah. So it's becoming a thing. And so I feel like that's something that we're embracing versus you talk to some of these people and it's, oh, we only clear through altruist. Okay. They're never gonna. They can't even hold cds.
[00:26:26] Speaker C: Exactly.
[00:26:27] Speaker A: So they're never going to be a platform that you can actually grow and scale and grow, bring in $100 million a year because there's not a hundred million dollars worth of clients that are out there that want just ETF's.
[00:26:42] Speaker C: Yeah.
[00:26:42] Speaker A: Right.
[00:26:43] Speaker C: Yeah.
[00:26:43] Speaker A: So you need to go to a place that's going to allow you to come in and grow, because that's the whole point of why you would be doing this, is either to grow it or to have a better case of succession planning for your family. Something like that, where you have the kids that are coming up behind you, own the book. That would be another reason why you would break away for most of the people that we're looking to recruit. It's for. They want. They see the vision of growing.
[00:27:11] Speaker C: It's the growth, and it's the control.
Growth and control.
[00:27:15] Speaker A: Yeah. So if that's you reach out to us, and maybe we're a good fit, maybe we're not, but we're for sure gonna at least not try to sell you on something. And that's right. We'll cut through the noise of things you've probably heard. Misinformation, misconceptions, or things that other people have tried to tell you that are frankly just probably not correct, not accurate, because you can't google this stuff.
[00:27:37] Speaker C: Yeah, exactly.
[00:27:39] Speaker A: Yep.
[00:27:40] Speaker C: Exactly.
[00:27:40] Speaker A: All right, that's a wrap. Thanks for listening, and we'll see you next time.
[00:27:43] Speaker C: Alrighty.
[00:27:44] Speaker A: Thank you for listening. We hope you enjoyed the podcast. Please subscribe to our channel. You can find more of our episodes on YouTube, Spotify, and Apple podcasts. And check us
[email protected], where you can learn more about how we help breakaway advisors just like yourself find independence.
