Should You Make a Break for Independence? 5 Reasons to Answer “Yes”
Should I stay, or should I go? For wirehouse advisors, that question used to be more about running away from a parent company than about running toward independence. But as the independent space has evolved, so, too, has the question. More and more, it seems what wirehouse advisors are asking is, “Should I go now?”
If you’re feeling the lure of independence tugging at you, it may be with good reason. The tables have turned, and today independent partner firms outmatch wirehouses in areas where they previously lagged, like technology integration and compliance support. The independent space offers another major edge, too: the freedom to control your business and growth trajectory, and the potential for greater earning power along the way. Not to mention the fact that issues such as the transition process and the smooth transfer of client assets are no longer seen as the hurdles they once were, making it much easier to make the leap.
If all that has you asking whether the time is right to make the move, consider some reasons that may be pointing to yes.
1) You Want a Partner That Puts Your Interests Ahead of Theirs
If it seems like your parent company is focused less on supporting you and more on taking care of its shareholders and bottom line, you might be on to something. Keeping shareholders happy ranks number one for many big-name firms. So, where does that leave you? If you want a partner that will show you and your clients some love, the independent world may be calling your name. Independent partners recognize they need you for their very survival—and don’t mind showing you by putting your interests and those of your clients first. Depending on the philosophy and culture of the firm you choose, it may nurture its relationship with you in the same way you do with your clients.
And, if you’re thinking about terminal growth, in the captive world the investments parent companies make are generally for the long-term value of their businesses, not yours. Independent firms, on the other hand—and especially privately held ones—can choose to reinvest in helping you grow now and in the future.
2) You Want to Be Free to Choose Your Clients and How You Serve Them
This scenario may feel all too familiar. You have aging clients with grown children. You know they could benefit from your guidance, but rather than taking them on as clients you find yourself having to turn them away. Why? They don’t meet the restrictive minimums you’re bound to by your wirehouse. The reality is you aren’t allowed full control over your relationships—even though your clients may have far more loyalty to you than your wirehouse.
As an independent advisor, your clients are your own. Want to set your own minimums? Check. Want to work with HENRYs (high earners, not rich yet) or the next generation of your legacy clients? Check. When you make the move to independence, you decide who you work with. What’s more, you get to be in control of the client experience. You are free to put your clients’ interests first without worrying about shareholders, layers of management, and other constraints of a wirehouse.
3) You Want Investment Solutions That Aren’t Tied to Production Quotas
Are you feeling pressured to sell your firm’s proprietary offering, even when you think outside products might be a better fit? In a captive environment, production quotas are often a fact of life.
In the independent channel, though, firms are providing access to an open architecture platform of nonproprietary investment solutions. They’re also providing research support that’s on par with what you’d expect from a large wirehouse. As a result, you can make objective recommendations for your clients based wholly on what makes the most sense to help them achieve their financial goals.
4) You Want Technology Solutions That Integrate Every Aspect of Your Business
In the past, firms in the independent channel fell short when it came to technology. But the technology gap between wirehouses and independents has closed—and some independent firms are gaining a clear edge.
Technology offerings at wirehouses are often created for the masses, making customization options less feasible and less of a priority. Independent firms don’t have to take this one-size-fits-all approach. In fact, independents have the ability and the inclination to make ongoing investments in integrated, intuitive tools that are scalable to keep pace with your growth. Plus, these tools often come with the benefits of flexibility and customization options to support the way you work, help you streamline processes, and save time.
5) You Want Payouts and Net Revenue That Favor You, Not Your Parent Company
No matter why you became an advisor in the first place, the bottom line is earning potential likely matters to you. And, if you don’t fall within the top few percent of producers at your wirehouse, these days you could be seeing a decline in payout and net revenue. The chance to boost your compensation in the independent channel—maybe even in a big way—is real.
To give you an idea of the kind of payout you can expect if you break away from the wirehouse, check out the average payout per advisor among independent broker/dealers in the Reps & Production section of Financial Planning’s IBD Elite 2020 rankings from July 2020. If you decide to make the move to independence, keep in mind there are certain costs of doing business on your own that will affect your overall compensation—from staff salaries and start-up costs to technology, compliance, and other fees. Those expenses can vary pretty substantially and often come down to whom you partner with.
Take It Slow and Go Steady
This could be a life-altering move, so you’ll want to do your homework before you make it. Start with some due diligence. No one can give you a better idea of what to expect from independence than the people who experience it firsthand. Try talking to former wirehouse colleagues—they can help you weigh the pros and cons so you can figure out what’s most important to you. When the time comes, the partner you choose may make all the difference too. As you evaluate your options, look closely at the transition process, the type of support they’ll provide, whether they can help you create your own brand identity and make a name for yourself, and how they’ll help you serve your clients in the future.
This post originally appeared on Insights, a blog authored by subject-matter experts at Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.