The financial crisis, triggered in 2008, helped open investors’ eyes to the breadth of options for professional financial advice available to them and gave a boost to independent registered investment advisors (RIAs).
Now the 401(k) business could potentially see a similar shifting of influence toward lesser-known names, as the industry heads toward fee disclosure requirements in January 2012. That was the thinking at the Buckingham Family of Financial Services, when it announced last Wednesday that it had acquired Advisors Access. The latter is a turnkey 401(k) program designed to help independent RIAs provide top-notch passive investing advice to 401(k) plan sponsors. The service features advisor-managed portfolios, access to exclusive institutional investments and one-on-one advice.
Advisors Access functions within a fiduciary structure, as clients work with an RISA 3(21) fiduciary advisor and an ERISA 3(38) investment manager, and its fees are transparent.
“Up to now, there has not been the requirement for sponsors and participants to understand in advance what they are paying,” Mont Levy, chief executive officer of BAM Advisor Services said in a telephone interview. “The transparency of fees has not had the emphasis that it will going forward.”
Buckingham, which did not disclose the price of the deal, acquired Advisors Access from Capital Directions, a fee-only, registered investment advisor with more than $800 million in client assets under management. Advisor Access will keep its name, and Capital Directions will continue to manage the program, according to a statement from the company.
Advisors Access uses a passive, asset-class driven investment approach using products from Dimensional Fund Advisors, Levy said. That strategy gives investors a greater exposure to the risk factors of small-cap, value, domestic or international funds, than they would find in a straight index fund.
The approach also avoids the strictures of strictly following an index as close as possible, Levy said. “Both approaches [produce] very low-cost funds, but Advisor Access provides terrific ongoing opportunities for investors to keep their overhead low,” Levy said.
BAM Advisor Services will open up Advisors Access to its 125 RIA clients. It will also make certain features available to independent advisors off of its roster on an a la carte basis, Levy said.
“The franchise value of the large name brands was damaged, and investors have a much keener sensitivity to thinking about whom they can trust and why,” Levy said. “The fiduciary-minded RIA, and advisors legally obligated to act as a fiduciary I think, will continue to show its real value to investors for the foreseeable future.”
