“I SURVIVED THE TRANSITION, AND ALL I GOT WAS THIS LOUSY NEWSLETTER”!

I think that would be an appropriate T shirt for our clients about now. After all, what was the transition all about? Why did we move your accounts away from LPL? After all that paperwork and hassle, what was the point?

Let’s talk about it, but first let’s clarify something: we did not move from LPL to TD Ameritrade. I know, I know, you’re probably saying “What are you talking about? I used to get my statements from LPL, and now I get them from TD Ameritrade!”

Yes, that’s right…. but I would have you look at your new statement more carefully. Although you will see the TD Ameritrade logo at the bottom (after all, they do create the statements), you will also notice our Financial Plan, Inc. logo at the top. This indicates that we are administering your accounts; not TD Ameritrade. We are now calling the shots, not TD Ameritrade or any other firm. Think of the change this way:

At LPL, although we were considered independent, we were “registered representatives” of LPL. A registered representative is also called a “general securities representative, a stock broker, or an account executive, “ and is licensed to sell securities. A registered representative must be sponsored by a broker dealer (such as LPL), and falls under the very lax suitability standard, which means only that securities offered to a client must be generally suitable for that client’s situation. At LPL we were regulated not only by LPL, but also by FINRA and the Washington Department of Financial Institutions. We were subject to hundreds of redundant rules and time consuming procedures. Frankly the multiple layers of regulation were overkill, and a distraction to us when attempting to pay attention to our core business. Furthermore although we were licensed to sell securities with LPL, we used that license rarely; instead we were creating financial plans and giving advice. In other words, the cumbersome regulations were inappropriate for our advisory practice.

This transition has elevated us to complete independence. We are no longer registered representatives; now we are an independent Registered Investment Advisor (RIA), and as a “large RIA” we are regulated at the federal level under the SEC and subject to their audits. We are considered a “fee only” RIA, and are no longer licensed to sell securities. Finally, we are now subject to a much stricter standard known as the fiduciary standard. Under this standard, “suitability” is not enough. We must always act in the best interest of our client. We must put aside our own personal interests to serve our clients.

As you may have noticed, we have always acted this way, but now our official status as a fiduciary matches our practice and we will no longer be dragged through the regulatory mud along with the garden-variety stock brokers and commissioned investment salesmen. As the administrator of your accounts, we now have the freedom to select outside vendors to fill various functions on your behalf. To date, we have the following relationships in place:

  • Custody and statement generation: TD Ameritrade Institutional (San Diego, Ca)
  • Variable annuity offering and custody: The Vanguard Group, Inc. (Malvern, Pa)
  • Customer relationship management: Force.com (San Francisco, Ca)
  • Research and performance reporting: Morningstar, Inc. (Chicago, IL)
  • Compliance and regulatory: Carr Butterfield. LLC (Lake Oswego, Or)
  • Errors and Omissions Insurance: Rice Insurance, LLC (Bellingham, Wa)

Because we are in control of these relationships, we can monitor them for quality and cost effectiveness. At this point we have already noticed a marked improvement over our LPL days, when all of the above functions were handled by LPL. Our new independent status creates a heavier lift for our staff, but they are up to it. We want you to know how much we appreciate your business and that we are working very hard to deliver top shelf financial planning and advice.

James Twining
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