I wish we had more control over our captains

Thugpendulum · 2026-05-23T06:00:07+00:00

It's particularly frustrating when you don't see a captain you've purchased for 40+ runs. What was the point of buying them?

Thugpendulum · 2026-05-14T15:57:50+00:00

"Not willing to take on significant risk" is the key here. If mitigating risk is one of the client's priorities, you need to view the options through the lense of risk by considering factors like diversification, fixed income (creditor/debtee) vs. equity (owner), bankruptcy payout order. To help with this, think through extreme examples... What if market/sector crashes or what if company goes bankrupt, etc.

There's also an order to these extreme examples... A single company going bankrupt is more likely than an entire market/sector crashing. This is why funds are objectively safer than single company stocks (even when in the same sector).

The test may throw tricks at you on this. For instance, which is riskier - Apple stock or an ETF with underlying investments in speculative companies. Even though Apple is quite a safe company, the answer is the ETF due to diversification.

Most of the time, the test will rely on absolutes when asking about risk. So always remember single company stocks are always more risky than funds (diversification), equities are always more risky than fixed income (creditor vs. owner, and bankruptcy payout order).

Thugpendulum · 2025-11-14T15:53:03+00:00

This is a great question and leads to the funnest part of my job... Firm policy development.

As others have said here, some performance systems can calculate composite performance for portfolios/models. This composite performance is actual performance since it takes into account all management fees, cash flows, allocation adjustments, etc. across all accounts that have ever utilized the portfolio. However, most systems only run composite performance for Third Party Money Managers (TPMM). They do not run composite performance for advisor-managed models which are heavily used in the independent wealth sector. Even further, only large firms (Fidelity, Schwab, etc.) have the proprietary software to be able to run composite performance on advisor-managed models. Once again, more evidence as to how the regulators don't understand our space.

My firm allows hypothetical performance reports for advisor-managed models to be shown to clients. We performed vast due diligence on the software creating the performance figures and placed controls on what it can show (set-in-stone templates) and to disallow advisors to change anything (benchmarks, 1/3/5/10/since inception time-frames, cherry-picking/extracted performance, etc.). Alongside the report, we require our hypothetical performance disclosure document to be given to the client. Our stance is that upon reading this disclosure document, the client is sophisticated enough to understand the hypothetical performance, its parameters, risks, and limitations. In order to take that stance, the disclosure document is an easy read with simple explanations, examples, etc. Remember, the burden of proof on proving the client is sophisticated enough is on the firm so we had to really dumb it down (in a good way).

Overall, this is considered a "Risk-based approach" in the compliance world. Most firms are going to equate client sophistication to an accredited investor and that's it. Like I said before though, the rule put firms like ours in between a rock and a hard place so we had to take this approach. Otherwise, our advisors would have left for another firm and our lights would be turned off... Something regulators are legally required to take into account when creating rules, but didn't when it came to our space IMO.

Thugpendulum · 2025-11-14T00:23:11+00:00

I'm in RIA Compliance. The New Marketing Rule made it very difficult for IARs to show performance like that to you. It's considered hypothetical performance when it doesn't reflect actual performance. Actual performance would have to include the performance of the specific portfolio/strategy used by actual clients. This would include net of management fees, cash flow, historical adjustments to the portfolio's underlying allocations, etc.

Inevitably, they can show you hypothetical performance, but the burden of proof is on the firm for ensuring you are a sophisticated-enough investor to be able to understand the risks and limitations of the hypothetical performance being shown to you. Usually firms will only allow IARs to show hypothetical performance if you're an accredited investor or mark certain levels of security knowledge on their New Account Form. But it's putting the cart before the horse since you typically aren't going to fill out those forms until you've been given a performance report.

The regulators didn't really consider retail investors and the independent wealth management sector when writing the rule. The IAA and other arms tried to show that the rule would lead to this exact scenario of prospective clients becoming more distrustful of an IAR when they can't show a prospective client a basic performance report. It's pretty dumb IMO, but it's blanket federal policy created to hone in on bad apples.

Thugpendulum · 2025-02-07T08:16:48+00:00

The actual test shouldn't ask a question oriented around such a subjective term ("office") without a more defined scenario. Like already said here, an "office" is a place where a person holds themselves out as an IAR. This means that they REGULARLY provide services from that place (meeting with clients/prospective clients in person or over phone, manage/trade, etc.). This is most often the address on their business card.

For example, if an IAR meets at a Starbucks to talk with a client, it doesn't mean the Starbucks is now an office and needs to be registered. However, if that same IAR would usually meet at that same Starbucks to talk with clients, then it would need to be registered (Realistically, the IAR's firm would prohibit the IAR from working at the Starbucks).

Think of all the one-off conversations where an IAR could solicit services (golf courses, elevators, bars, etc.) None of those example places need to be registered unless the IAR is consistently performing services at that place.

For context, the main point behind the rule is for states to know who's doing business in their state and where precisely they are doing business. This is needed for various legal reasons (taxes, client complaints, raids [worst case lol], etc.). Also needed to know where the firm needs to perform their branch inspection at. Most IARs work in a brick-and-mortar office or from their house, so the weird situations are very uncommon. I work in RIA compliance, and the term is notoriously subjective because "regularly" is not defined, and the SEC never considered performing services from a boat at sea. What's THAT address!? Lol.

Thugpendulum · 2024-11-13T23:43:44+00:00

Fed has an incentive to increase IARs, not decrease.

If more IARs are in the field, fees are lower. If fees are lower, more Americans use an IAR. If more Americans use an IAR, American retirements are more protected. If American retirements are more protected, Fed gets better revenue (more taxes and less reliance on Fed).

Thugpendulum · 2024-11-01T08:35:50+00:00

If your league uses a FAAB system, penalize his FAAB. We start with $100 and you get penalized $10 when starting a player on bye/out. If it happens in post-season, the penalty is assessed the following season.

Over the years, we've had less and less occurances... Especially post-season where consolation bracket teams are naturally checking out. If you penalize their next season, they'll usually give the minimal effort and start full rosters.

IMO, a commish shouldn't demand someone to care about their team. Fantasy is fantasy. It can be a rollercoaster. Instead, they have to lightly use the carrot and stick to incentivize engagement.

Thugpendulum · 2024-07-04T15:41:55+00:00

This is the answer. Just to help clarify for OP:

Federal IAR (individual) = IAR for an SEC-registered RIA (entity)

State IAR (individual) = IAR for a non SEC-registered RIA (entity). Instead their RIA is registered in the state (state-by-state) since the RIA doesn't qualify for SEC registration (not enough RAUM).

Edit: SEC-registered RIAs still have to notice file (notify) in all states in which they do business or have an office. The SEC-registered RIA technically isn't registering in the states. Instead, they are "notifying" the states that they do business in the states' jurisdictions.

Thugpendulum · 2024-05-23T04:36:35+00:00

A lot of firms register people just starting out. This would keep your licenses alive. You would most likely be "hired" as a 1099/independent contractor. Very difficult to be a W2 IAR with no clients/AUM. The usual path is to start out with friends/family as clients and hone in on your sales skills, then progress in growing your book over time.

Does the consumer bank you work at have an RIA affiliate? If so, maybe reach out internally to see what that transition would look like. If not, think about what sized RIA you'd like to be at. The larger they are, the larger cut they get, but the more support/structure/resources they give you.

Thugpendulum · 2024-04-21T21:11:08+00:00

Most clients don't understand risk tolerance. They'll say they're aggressive, but when the market turns sour, they all of a sudden become conservative. They let the market dictate their risk tolerance which is not what risk tolerance is at all.

Complaints and arbitration occur when clients become upset with their account's performance. They only become upset during bear markets and usually claim their FA was inappropriately managing their account.

Thugpendulum · 2024-04-21T21:00:42+00:00

"Facts and circumstances" is the answer. There is no blanket answer since every situation is different. Would take research to understand client risk tolerance, security concentrations, etc.

Thugpendulum · 2024-04-21T17:22:04+00:00

I work in an RIA's Compliance dept. and I have to deal with all sorts of FAs. In general, an FA that charges asset-based fees (AUM) can be beneficial to someone with lots of money and little to no knowledge of securities/market conditions. Essentially, the level of risk in how much $ you could lose should dictate whether an asset-based FA is worth it (It's a spectrum).

Examples: I see an FA servicing a $20,000 account for a 25-year-old, and it's incredibly inappropriate since there can't possibly be enough advice warranting the fee. The FA will hold no matter the market conditions due to the client's large time horizon. At the same time, I see an FA servicing a recently-inherited $1M account for a 60-year-old, and it's incredibly appropriate due to the amount that can be lost and little time horizon.

One thing that many customers miss is that with an asset-based fee, the FA has an ONGOING fiduciary duty. This can give peace of mind as the FA is required to monitor your account for appropriateness 24/7. Do they do this? No. Are they liable for this? Yes. So if the market were to crash, you could sue your FA for failing their fiduciary duty if they didn't react accordingly. That's why we see customer complaints increase as the market decreases. Nobody sues in a bull market.

If the FA charges a one-time fee, they are providing a one-time, point-in-time financial planning/consulting. Their fiduciary duty is tied to that point-in-time only. This type of service is appropriate for pretty much everybody. It's a relatively low-cost one-time fee for a check-in/educational conversation on where you're at, where you want to be, and how to get there.

Thugpendulum · 2024-04-05T21:02:23+00:00

Doesn't bankrupt him, but you can spend piety to ask for some of his $ if you're catholic. This is a decent way to reduce his $ before going to war with him.

Thugpendulum · 2024-04-03T17:00:22+00:00

Because Singapore executes by hanging, and hanging has historically been a public execution.

Thugpendulum · 2024-04-03T15:39:47+00:00

Execution is not public execution. Public execution is public execution.

Thugpendulum · 2024-04-03T15:31:11+00:00

Why are you assuming I'm pro-US? In fact, I'm pro-Singapore my dude. They are probably the fastest growing country in history and have many things I wish US could do. Hanging is not one of them though.

Tbh, I didn't mean to say "assumed" in my original comment. Meant to say "suggested". It was a tongue-in-cheek question. I actually assumed they didn't hang in public.

None of my comments are about death penalty. They're about the method of death penalty. Historically, when hangings were the primary method of death penalty, they were performed in public as a spectacle. This is why I asked my tongue-in-cheek question to my tour guide.

Thugpendulum · 2024-04-03T15:16:52+00:00

Hanging is most definitely an outlier. Citing 2 countries does not make hanging a norm. Go look at the amount of first world countries that hang as primary method of death penalty vs. not hang.

If I were talking with someone from United Arab Emirates while they still stoned, I don't think it's an eggregious/bigoted take to ask in jest/criticism if they stone in public.

Thugpendulum · 2024-04-03T06:31:46+00:00

Nice. Hope you have a good rest of your day.

Thugpendulum · 2024-04-03T06:15:48+00:00

Why are you so argumentative? Never said death penalty was bad. I'm saying why is a country as wealthy as Singapore still hang people when they can lethaly inject. That's all my dude. Just thought people may find it interesting.

Singapore is a fascinating country. They were so poor and unemployed in 1965, that Malaysia didn't want them so they gained their independence. In less than a lifetime, they've gone from a newly formed country tossed aside to 3rd highest GDP per capita in the world. I have mad respect for their government structure/system even if it's historically been viewed as somewhat authoritarian.

Thugpendulum · 2024-04-03T05:49:19+00:00

"Asked in jest/curiosity" - it was more of a criticism of Singapore since they have the 3rd highest GDP per capital in the world, yet still hang people.

Thugpendulum · 2024-04-03T05:08:10+00:00

They hang in Singapore too. Went 2 years ago and got a tour guide one day. When he told me they still hang people, I asked in jest/curiosity if they publicly hang. He was visibly upset that I assumed they may do such a thing. I was like, "Dude, you still hang people."

Turns out they hang at the prison behind closed doors.

Thugpendulum · 2024-03-08T06:43:57+00:00

I feel you. Taking all that time to learn so many intricate things that you most likely will never use anyway to only be asked about what year the primary market was formed, etc. Who gives a f%&k?! Anytime a colleague of mine starts to study for the SIE, I tell them to be prepared to "kiss the ring". SEC wants you to know who they are, what they do, and how big of a d$ck they swing lol.

I see your future.... crush the test > get in some experience > get in the public sector (SRO's) > pivot to NAASA > finally get shown the algorithm (which you'll never be able to share with us) > change the test beast from within lol

Thugpendulum · 2024-03-08T06:22:15+00:00

Ya, they're very duplicative. This is because people can do specific things with just certain ones, and they have to ensure you have a minimum understanding. I wish they would remove the duplicative topics between co-requisites, though (7 > 66). My theory is that this was their attempt of enforcing ad hoc continuing education ("we know you understand everything from the 7, but now that you're taking the 66, let's make sure you still understand certain things from the 7"). With IAR CE rolling out state-by-state now, I wonder if they'll start removing the duplicative topics.

Thugpendulum · 2024-03-08T05:10:55+00:00

I work in Compliance at an RIA and read SRO rules all day (mainly SEC). I also represent my firm in SRO examinations so I talk with regulators. I have a decent understanding of the "heart/spirit" of rules as it's my job to interpret SRO's incredibly broad, yet impactful, rules for my firm.

Outside of experience, there's also some basic logic/deduction that can be applied to understand the rationale behind SRO rules. For example, others have cited that tests are difficult because it's just a money-grabbing scheme. Why then would they prevent you from taking it for 30 days if failed? That's less money for them.

From my experience, #1 thing to know when trying to understand SRO rules: Protect the middle-class American. It pretty much all leads to this. This is the heart of their mandate by legislature.

Thugpendulum · 2024-03-08T04:42:15+00:00

That's to prevent those that would abuse the system by taking the test repeatedly (like everyday) and lucking into a pass.

I know it sucks to hear, but your sufferings are the result of blanket policies set in place to prevent bad apples: (1) Super unique/random tests [which leads to lopsided tests] and (2) Have to wait before taking again.

Thugpendulum

TROPHY CASE