How the Right Custodian Can Help Advisors Avoid Headaches and Grow Their Business

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To advisors, the invoicing and billing process is a massive time suck. It’s a mundane and administrative task that uses up hours that could be spent on a more meaningful item on their to-do lists: taking care of clients.

“Advisors find it time-consuming and a poor use of their time, invoicing and billing and receiving payment from their clients,” said Michael Freeburg, founder of Greenwich Wealth Management, a $1 billion-plus registered investment advisory firm. “It’s generally considered a necessary waste of time.”

Interactive Brokers, the largest electronic broker in the U.S., offers technology to make invoicing and billing painless, flexible and transparent. It’s also free.

Branding itself a technology company that operates in the trading business, Interactive Brokers has an invoicing process that’s 100 percent electronic and automated. Once the advisor agrees with the client on a fee and frequency of the fee, it’s automatically calculated based on those parameters, withdrawn from the client’s account and put into the advisor’s account.

While percent of assets is the fee base many advisors prefer, IB’s system affords the flexibility of charging per different periods, such as daily or quarterly. It also allows advisors to charge a percent-to-performance fee or per trade. The manner in which a client is charged can be seamlessly modified anytime.

Daniel Johnedis, president of Cratus Capital, said that before switching to IB in January 2015, he paid a third-party service to do his invoicing.

Now with IB, Johnedis said, “I have the choice of what to charge. All I have to do is send an invitation with the fee that’s been agreed upon and that fee can be adjusted very easily. It’s very transparent to the client, and it’s all done interactively.”

Also, IB’s flexibility works perfectly for Cratus’ graduated fee scale – the larger the client, the lower the percentage of assets charged. Cratus was not able to do that with its former broker.

Added Kevin Ellis, managing director at Horse Cove Partners, “It has allowed us to remain a lean organization without the need to build out an extensive back office.”

Freeburg said invoicing “is one of the chief complaints of being an advisor, and I don’t even have to think about it. … I never spend any time – and I mean, I don’t spend five minutes a month – tending to advisor invoicing. There’s no time, there’s no cost, there’s no conversation.”

Interactive Brokers’ invoicing and billing system is the No. 1 reason advisors choose the company, according to Steve Sanders, executive VP, marketing and product development at IB.  Here are four others.

Customer Relationship Management (CRM)

Interactive Brokers’ Customer Relationships Management (CRM) system is built into the application process and comes at no cost to advisors.

“Rather than spending a lot of money on (third-party solutions), advisors can use our CRM for free,” IB’s Sanders said.

The fully searchable CRM allows advisors to store, view and update all the pertinent information about their clients, sort contacts into groups and send bulk emails. Advisors can also convert leads into sales via electronic invitations and import contact information from Excel.

Essentially, it’s a comprehensive solution for managing client relationships.

Greenwich Advisor Compliance Services

Particularly for new advisors, compliance is burdensome and stressful.  To assuage the uneasiness by helping advisors navigate the complex legal and regulatory landscape, IB last summer launched Greenwich Advisor Compliance Services.

The IB subsidiary helps advisors set up their own firms, determine an appropriate way to charge clients, and understand the SEC’s rules regarding advertising, custody of a client’s assets, record keeping and insurance and bonding.

Investors’ Marketplace

The Investors’ Marketplace is a website where providers advertise their services to investors. Advisors can benefit from this resource in two key ways: 1) promote their services to clients or prospects, and 2) through the Money Manager Marketplace subsite, identify money managers to partner with whose expertise complements theirs.

“If an advisor has expertise in trading stock and they know nothing about futures or hedge funds, and they want to invest some of their clients’ money into futures or hedge funds, they can find and hire a money manager within the Investors’ Marketplace and give them a portion of their clients’ money to manage,” Sanders said.

Greenwich Wealth Management has acquired business through its listing on the Money Manager Marketplace, and has also used the Investors’ Marketplace resource to invest money with other managers whose strategies match its clients’ needs, Freeburg said.

Trader Workstation trading platform

All three IB clients we spoke to boasted of the broker’s trading capabilities’ impact on their businesses.

“We have not found any other custodian who offers anywhere near the robust market access across as many international currencies,” Freeburg said. “We trade, transact and invest across a number of currencies and across several time zones in other countries. Our ability to do that with Interactive Brokers is seamless, efficient and inexpensive.”

Horse Cove’s Ellis added of IB, “Their trading systems provide a way for us to serve over 150 accounts that can be traded in groups rather than individually. This allows us to serve our clients (regardless of) account size, so that they are getting execution allocation all done by IB’s systems.”

Johnedis said IB’s rates are less expensive and its trading system is far more transparent than those of its competitors.

“What really appealed to us about Interactive Brokers was their focus on RIAs and their platform, their trading and their service are really geared toward people like myself,” he said. “This is their specialty and they do it very well.”

Concluded Sanders, “From 10,000 feet if you’re looking for an all-in-one automated solution that’s cheap and flexible, we’re the place to come.”

To any advisor, the bottom line is where the story is told, and since switching to IB just over a year ago, Cratus’ tale has been a happy one.

“It’s helped us greatly,” Johnedis said. “It’s helped our performance over the past year. We’ve always done well, but we’ve done better in the last 14 months on a relative basis, and a lot of that has to do with the trading capabilities that we didn’t have (with our previous broker).”



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