Dopkins Wealth Management is a member of the BAM Alliance, a community of more than 140 independent wealth management firms located throughout the United States — united in belief and in practice that there is a better, more effective, and more resilient way for investors and their families to safeguard their financial futures and realize their dreams. Our clients benefit in many ways through this alliance, including many fixed income advantages. The following outlines some of these benefits to fixed income investors.
Dopkins, through the BAM Alliance, works with BAM’s Fixed Income department, a team of dedicated fixed income advisors who help provide customized investment solutions for Dopkins’ clients. BAM’s Fixed Income Desk evaluates new assets and portfolios, constructs bond ladders and monitors bond positions for credit quality changes. The desk manages more than $8 billion in bonds and bond funds and trades $2 billion in market value a year. We want to share some key differentiators between Dopkins and BAM’s Fixed Income offering compared with the traditional broker-dealer model.
Standard of Care
Broker-dealers are only held to a suitability standard, meaning they can sell bonds to clients as long as they are suitable for them. This allows the broker to take his or her own personal interests into account when offering a bond. Both Dopkins and BAM’s Fixed Income team is held to a fiduciary standard, a legal obligation (Invesment Advisors Act) to always act in the best interest of the client. Unlike broker-dealers, Dopkins and BAM cannot put its own interests ahead of the clients’ when purchasing fixed income securities.
Broker-dealers make money on each transaction by marking up the price of each bond sold to a client. To put in dollar terms, a 2014 article1 in The Wall Street Journal stated that retail clients experienced an average markup of 1.73 percent on municipal bonds. For example, this means an investor purchasing a $100,000 municipal bond would pay $1,730 in commission to the broker. Unfortunately, such bond markups do not need to be disclosed to clients. On their trade confirmations, clients typically only see a nominal transaction fee of $25 to $50.
Dopkins is not paid on commission, so there is no incentive to generate more transactions or large markups. We work as clients’ personal bond buyer in the marketplace, attempting to get the best bond at the best possible price. The desk cannot totally avoid markups because it does need to source bonds from somewhere. It can drive down the markups clients pay by putting broker-dealers into competition for each trade. To put this into dollars, BAM’s Fixed Income Desk can typically drive down municipal bond markups to roughly 0.20 percent or $200 on your average $100,000 bond trade. This is in stark contrast to the broker-dealer commission example cited above.
Another key difference is traditional broker/dealers carry an inventory of bonds which they incentivize their brokers to sell to clients. Clients are typically only shown a small fraction of the bond market. Being Registered Investment Advisors, Dopkins and BAM cannot legally hold a bond inventory and is not incentivized to sell certain bonds or types of bonds to clients.
Another Dopkins Difference
Because of its business model, both Dopkins and BAM’s Fixed Income Desk is able to remove the many conflicts that investors can face in the opaque fixed income markets. Removing these conflicts allows our firm to build deeper relationships with our clients by providing unbiased advice at the lowest cost possible. We are driven out of bed in the morning to helping people like you map, pursue and achieve your investment objectives. Contact any one of us.
1The Wall Street Journal — “Muni Bond Costs Hit Investors in Wallet” (March 10, 2014) Copyright © 2015, The BAM ALLIANCE. This material and any opinions contained are derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice. To be distributed only by a Registered Investment Advisor firm. Information regarding references to third-party sites: Referenced third-party sites are not under our control, and we are not responsible for the contents of any linked site or any link contained in a linked site, or any changes or updates to such sites. Any link provided to you is only as a convenience, and the inclusion of any link does not imply our endorsement of the site.
Whether you are evaluating wealth management firms or career options or even if you are already a client, you'll want to know what it is that differentiates Dopkins. We think of it as being One Firm. Watch as we articulate The Dopkins Difference and what that means to us and for you.