New Firm Tops SEC-RIAs List for ’07

For the first time since the Northwest Arkansas Business Journal began tracking SEC-registered investment advisers, a firm has surpassed Garrison Asset Management (a company that was first Llama Investments, then Garner Asset Management before its current incarnation) in terms of managed assets.

The annual list of the area’s largest investment advisers and largest brokers begins here.

AdvisorAlliance LLC of Rogers opened its doors on Oct. 1, 2006 and has already garnered $221 million in assets under management, almost 8 percent more than Garrison.

However, Garrison lost its Garrison Financial Advisors arm earlier in the year when Tom Schallhorn, then principal for GFA, left the firm and joined InvestLinc, an Ohio-based wealth services firm with an office in Fayetteville. That represented a loss of about 128 accounts and $70 million in managed assets.

Rebecca Garner also left Garrison in the spring to join Decatur, Ill.-based Investment Planners Inc., a former institutional client of GAM. She opened an office in downtown Fayetteville.

In all, the list represented about $788.2 million as of Sept. 30, up from $681 million a year earlier. Two firms, Greenwood & Associates Inc. of Fayetteville and Palm Beach Capital Corp. of Fort Smith declined to participate or disclose relevant information and therefore were omitted from the list.

– Worth Sparkman

Ruling Causes Little Trouble For Area Brokerage Firms

On Oct. 1, brokerage firms across the U.S. were forced to discontinue their use of fee-based brokerage accounts when a federal court ruled that the accounts were created through an overstep in authority by the U.S. Securities and Exchange Commission.

The accounts, which were created in 1999 as a way to discourage “churning” or frequent trading by brokers and financial advisers, charged customers an annual, asset-based fee for the account regardless the amount of activity.

Mel Parks, CEO of Arvest Asset Management, said the accounts were started with good intentions because they put brokers and clients on the same side of the table. But along the way many accounts fell victim to broker neglect because brokers found they could earn an annual commission from the account without having to invest a great deal of time to managing the account.

As a result of the court’s ruling, firms that were using fee-based brokerage accounts were forced to move clients to new accounts.

Parks said the most common account alternatives are a commission account, which many brokers used before the invention of the fee-based account, or a managed investment advisory account.

The change greatly impacted some national investment firms, such as New York’s Merrill Lynch & Co., which had $108 billion in fee-based brokerage assets. But many investors and brokers in Northwest Arkansas said the ruling posed little hardship for them because they never offered the accounts.

“I never offered the accounts because I believe they are one of the worst options for clients,” said Brad Anderson, financial representative for Northwestern Mutual Investment Services LLC in Fayetteville. “Northwestern Mutual has a practice of using the proper share classes to give clients the lowest possible sales charges over time.”

Anderson said Northwestern Mutual had $358 million in total revenue during 2006, $105,000 of that was in fee-based accounts.

Most brokers said that while fee-based brokerage accounts had their place, the mandatory discontinuation was not a major hurdle for the industry.

– Katie Stockstill