I created Alfidi Capital to be a research-only platform, which is fine by the SEC so long as I do not maintain fiduciary relationships, sell securities for third parties, provide personal advice or recommendations, or do other things that fall under regulatory guidelines. I considered going that traditional route at inception, and I quickly realized that doing brokerage or capital markets transactions were part of the things I did not like about working for other people. My thinking has not changed since 2008 and neither has my business model. I might as well lay out some of the thinking I did before turning away from the more common path to independence.
I first checked the regulatory requirements for a registered investment adviser (RIA). The SEC's basic guidelines for investment advisers point to its IAPD site for filling out its Form ADV. I reviewed that form and realized that it does not apply to me as long as I am not providing financial advice, selling financial securities, or maintaining custody of assets other than my own.
I reviewed the institutional platforms of several leading self-service brokerages. The platforms come bundled with custodian and clearing services, plus some optional things like independent research subscriptions. I would not be surprised to find social media services bundled with some platforms now, along with media archival systems that meet SEC compliance standards. I realized I did not need to spend money for such a platform if the only money I ever manage will be my own.
I checked FINRA's rules for the registration and qualification of advisory firms. There's a lot of things there to know for someone who doesn't handle compliance as a full-time job. I would have had to meet all of the compliance requirements like client correspondence recordkeeping, transaction auditing, keeping copies of advertising material, writing a compliance manual, using business cards with the state insurance registration number on back, etc. There are lots of independent SarBox consultants who charge big fees for this activity. I will always be too cheap to pay for anyone else's services. I did not want the operating expenses of regulatory compliance or an "RIA in a box" solution.
I needed an alternative to the overhead of an owned RIA platform. I briefly researched an arrangement where potential clients could custody their assets in a conventional account with a discount broker, but grant an adviser limited power of attorney to execute transactions and extract a management fee. That's the approach of at least one RIA in San Francisco. When I spoke to the local one I thought was a good model, I realized there was just no way to escape the potential problems of dealing with clients and regulators.
The administrative things that my former wealth management employer used to pay for like insurance, licensing, continuing education, etc. would have become my own expenses. I thought about finding CE requirements through a local chapter of the Financial Planning Association. The FPA is probably full of plenty of independent practitioners, and I had wondered if some older adviser would hand over a book of business prior to retirement. The window for such opportunities is rapidly closing now that discount brokerages are deploying robo-advisors with automated portfolio rebalancing. I would have wasted time buying into a dying business model.
All of my homework revealed that an adviser model would never work for me. Publishing general circulation research is consistent with SEC analyst rules and reflects my intellectual gifts. I have said before that Alfidi Capital does not perform financial brokerage and advisory services for others. There is no way this firm or I will ever conduct securities transactions and business with the investing public. I stand by my decision.
I first checked the regulatory requirements for a registered investment adviser (RIA). The SEC's basic guidelines for investment advisers point to its IAPD site for filling out its Form ADV. I reviewed that form and realized that it does not apply to me as long as I am not providing financial advice, selling financial securities, or maintaining custody of assets other than my own.
I reviewed the institutional platforms of several leading self-service brokerages. The platforms come bundled with custodian and clearing services, plus some optional things like independent research subscriptions. I would not be surprised to find social media services bundled with some platforms now, along with media archival systems that meet SEC compliance standards. I realized I did not need to spend money for such a platform if the only money I ever manage will be my own.
I checked FINRA's rules for the registration and qualification of advisory firms. There's a lot of things there to know for someone who doesn't handle compliance as a full-time job. I would have had to meet all of the compliance requirements like client correspondence recordkeeping, transaction auditing, keeping copies of advertising material, writing a compliance manual, using business cards with the state insurance registration number on back, etc. There are lots of independent SarBox consultants who charge big fees for this activity. I will always be too cheap to pay for anyone else's services. I did not want the operating expenses of regulatory compliance or an "RIA in a box" solution.
I needed an alternative to the overhead of an owned RIA platform. I briefly researched an arrangement where potential clients could custody their assets in a conventional account with a discount broker, but grant an adviser limited power of attorney to execute transactions and extract a management fee. That's the approach of at least one RIA in San Francisco. When I spoke to the local one I thought was a good model, I realized there was just no way to escape the potential problems of dealing with clients and regulators.
The administrative things that my former wealth management employer used to pay for like insurance, licensing, continuing education, etc. would have become my own expenses. I thought about finding CE requirements through a local chapter of the Financial Planning Association. The FPA is probably full of plenty of independent practitioners, and I had wondered if some older adviser would hand over a book of business prior to retirement. The window for such opportunities is rapidly closing now that discount brokerages are deploying robo-advisors with automated portfolio rebalancing. I would have wasted time buying into a dying business model.
All of my homework revealed that an adviser model would never work for me. Publishing general circulation research is consistent with SEC analyst rules and reflects my intellectual gifts. I have said before that Alfidi Capital does not perform financial brokerage and advisory services for others. There is no way this firm or I will ever conduct securities transactions and business with the investing public. I stand by my decision.