It was 12 years – almost to the day.
On Nov. 18, 2005, they joined Merrill Lynch and on Nov. 17, 2017, they left to begin their own company: Affinity Wealth Partners.
Sitting at a conference table in their sublet office space at Killian Construction Co., senior financial advisers and managing partners Dana Havens, Ryan Patterson and Delvan Mitchell reflected on those years – which set in motion a chain of events that brought about their new financial-planning company.
It’s complicated. But job changes in “wire house” brokerage firms seem to have increased following new U.S. Department of Labor fiduciary laws and large firms withdrawing from the broker protocol – changes that Havens, Patterson and Mitchell say put their industry in a box.
“It was to the point where the writing on the wall looked like it was going to be one size fits all in the financial industry,” Mitchell said. “And we don’t live in a one-size-fits-all world.”
At Merrill Lynch, the trio typically handled ultra-high-net-worth accounts – measured as anything over $10 million. The team managed $300 million at Merrill Lynch, and Mitchell said they expect 95 percent of that to follow to Affinity.
While they still work with client accounts of that magnitude, Affinity’s average account is $2-$3 million. Falling into that category, Patterson said, are individuals who graduated from college as the market crashed and struggled to regain financial traction.
“We think they are an underserved niche, and we want to come in and start serving this generation,” he said.
Assisting people still growing their wealth is a primary focus for the new company – and something the partners say they didn’t feel at liberty to do prior.
“We want to serve anyone that needs our service,” Havens said. “Meaning, whether you’re in the growth stage of your life, in the accumulation stage or the spending stage in retirement.”
The inhibited desire to work this way ultimately birthed Affinity – beginning with altered fiduciary standards of care by the Department of Labor in June 2017. According to the DOL, the law requires advisers to “adhere to the best standard when making investment recommendations, charging no more than reasonable compensation for their services, and refrain from making misleading statements.”
Companies were left to interpret how to implement the law, the Affinity partners said, and at Merrill Lynch, that entailed what they said were changes to how advisers operated and reported to upper management.
“We basically had to start answering and doing our job twice,” Patterson said. “Not only did we explain it to the clients, we had to explain to upper management on an ongoing basis.”
Mitchell said they also were uncomfortable with being required to refer clients to parent company Bank of America (NYSE: BAC).
“Our job is to find the best investments and services for our clients and that doesn’t necessarily mean the banking services that Bank of America had,” he said. “There are, especially in Springfield, a number of banks that are able to provide home loans, cash management services and such. That didn’t always fit within the bank referral program.”
The team at Affinity isn’t alone. Others to move from Merrill Lynch in recent months were Glen D. Smith & Associates in the Dallas market, moving his team’s $262 million in assets under management, and the Keith Group in Pennsylvania exiting its $230 million AUM, according to published reports by Financial-Planning.com and OnWallStreet.com. Those advisers also cited bank-related activities, as well as investment product sales quotas and changing fiduciary standards.
Once they went looking, the Affinity trio landed on an independent contractor partnership with Raymond James Financial Services Inc. (NYSE: RJF).
Raymond James on the whole manages some $693 billion in client AUM and employs 7,300 financial advisers, according to its fourth-quarter earnings report. Merrill Lynch has not yet released its fourth-quarter report. According to its website, it employs 15,000 financial partners representing $478.9 billion in AUM.
According to RaymondJames.com, those in an independent contractor agreement receive 80-100 percent payout, create their own benefits package and have access to all Raymond James’ products and services, including the company’s financial planning platform, performance reporting, research and training system.
Declining to disclose startup capital, the Affinity advisers say they have a line of credit available for those costs from Raymond James but have not used it yet.
When asked if Merrill Lynch is seeking replacements for the Affinity partners, Springfield Merrill Lynch financial adviser Shelley Marshall said the branch is always hiring. She declined to comment on the recent changes. She referred Springfield Business Journal to Merrill Lynch’s corporate communications department, which did not return calls by press time.
As Affinity took shape, another massive change surfaced in the industry. Firms began quitting the broker protocol.
The protocol agreement, established in 2004, applies standards for transferring client information when a broker changes firms. It aimed to reduce lawsuits between firms. According to TheBrokerProtocol.com, currently 1,706 firms participate in the agreement.
However, firms are beginning to back out – starting with Morgan Stanley (NYSE: MS). The company announced in an Oct. 30 news release it would exit the broker protocol, and UBS Financial Services Inc. (NYSE: UBS) followed a month later with its own withdrawal notice. Wells Fargo & Co. (NYSE: WFC) seems to remain on the fence.
According to On Wall Street, a self-described network for financial advisers, Morgan Stanley lost more than 10 teams and over $7 billion in assets following its withdrawal announcement.
Merrill Lynch, however, announced Dec. 4 that it would stay in the protocol, according to Nasdaq Inc.
Although the protocol upheaval occurred after Affinity’s partners made the decision to leave Merrill Lynch, Havens said it was opportune timing for an exit.
“We got really lucky we had already made the decision,” she said. “To me, that is a sign of desperation if the big wire houses are saying, ‘We’re doing this.’”
Currently, Affinity has 115 clients worldwide, but most are in the Ozarks. The advisers say they like their current office at 2664 E. Kearney St. but have plans to eventually find a space of their own. The company also has big news: It just hired a fourth adviser, who also is moving from a large firm. Because of the stage of the transition, Affinity’s partners declined to disclose his name.
The new adviser, slated to begin in February, is joining a unique team that shares client accounts.
“Everything we do runs through one team account,” Havens said. “We all get paid based on each client. It’s very unusual. That’s the way it should be and that’s what (the industry) is trying to get to. Even after all these years, they’re still figuring it out.”
The company employs four administrative staff – one working full-time and three part-time. Havens said the advisers delegate jobs based on preference and individual skill, although each team member is able to perform every aspect of operations. Havens is chief operating officer, Patterson manages investments and the new adviser will join Mitchell, making client contacts.
“We really broke it down to what you like to do. What do we like to do and what are we best suited for?” Havens said. “Who do you call? It depends on what you need. Any of us can answer the questions if one of us isn’t available.”
Ozarks Elder Law LLC closed on its acquisition of RTR Attorneys in Marshfield; Nashville-style fried chicken and catfish restaurant Hot Cluckers got its start; and the first Geico insurance office in the Queen City opened.
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