Throughout the conference, Commonwealth executives outlined the path toward the ambitious goal, including a lowering of platform fees, offering to take a minority equity stake in the advisor shops affiliated with Commonwealth, buying out a rep’s commission-based trailing revenue to let them to drop their FINRA license and clean their books of the legacy assets, and expanding its suite of business solutions and ancillary services for the advisors, including lending, para-planning and business consulting. “Commonwealth feels more like the RIA channel,” said Kenton Shirk, a former wealth management analyst with Cerulli who heads up a 20-person practice management consultancy team inside Commonwealth. “It’s a heavily fee-based business, and 60% of the practices are ensembles, or enterprise practices,” as opposed During his keynote address, Kloman announced that the firm will reduce the pricing tiers on its platform by about 60%, effective Jan. 1. Commonwealth launched the platform fee four years ago, wrapping a single fee for trades in all securities for taxable accounts and IRAs. The old platform fee ranged from as low as 1 basis point for larger accounts to 12 basis points for smaller accounts. The new platform fee structure has fewer tiers, and fees range from 5 basis points to 1 basis point, depending on account sizes. “As we scale, we have a history of sharing economics back with our advisors,” Kloman said. In June, the firm launched its Entrepreneurial Capital program , which includes expanded loan options for advisors, as well as an equity offer. Commonwealth will take up to a 40% stake in an advisor’s practice, which can be used for succession planning, expanding operations by buying another firm, implementing marketing and technology programs, or even for personal liquidity, Bloom said. to solo shops or teams of advisors each running their own books of business. Commonwealth CEO, Wayne Bloom Photo Credit: Erin Feinblatt “
“Collectively, you have the best practices in the country, and we want to help you drive them to be even better. We believe so strongly in this, we’re putting our money on the table by expanding the availability of debt, and deepening our partnership by offering to become minority equity owners in your firms,” Bloom said, during his opening keynote. “Nobody ever has to leave Commonwealth to access capital for almost any reason.” Commonwealth executives said its strategy behind the minority investments is different from some of the private equity-backed rollups; they see it as a way to satisfy capital needs of advisors, not as a way to create a new revenue stream for Commonwealth. “I think other firms, frankly most that are going about this,
they’re doing this for their own purposes. It’s another way to generate revenue. It’s a way to get their claws and control something, and advisors lose that choice,” Kloman said. “We’re not trying to roll this up, and we’re not going to flip it and try to arbitrage,” Bloom added. If an advisor leaves, Commonwealth agrees to sell the the equity back to the firm at the current valuation. Part of the firm’s path going forward includes helping advisors transition their practices away from a legacy brokerage business to the RIA platform. For instance, if an advisor has a little bit of legacy
Most importantly, it’s growth that will be well-managed and done in sync with our mission, vision and values.
commission business, say $50,000 in trails, those become house accounts, and Commonwealth would make an adjustment to that advisor’s platform pricing in consideration. But if an advisor has a lot of trails, the firm will help move those to house accounts where clients can sign additional documentation so the advisor could still bill clients for monitoring and advising on them.
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