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4 Options for the Sub-$1MM Advisor Considering Change


Written by: Debbie Wallen

The Options That Exist for the sub-$1mm Producer

Not that long ago, generating $1mm in revenue was a milestone worth celebrating: Those at this level were considered top of the food chain, and ardently pursued by all major firms.

But, in today’s world, it’s the advisors in the “Billion Dollar AUM Club” who garner the lion’s share of attention from firms. As such, it can often seem like there’s no shortage of opportunity for those in these ranks who are looking to switch firms.

But what of their lower-AUM colleagues? Many firms no longer support this pool of advisors as they once did, often making it difficult for them to service clients or grow their businesses. And when an advisor feels under appreciated, unsupported and underserved, clients are undoubtedly impacted—no matter what the advisor does to shield them.

From where I sit, it’s a shame that advisors managing $100 million instead of $1 billion feel like persona non grata at their own firms and when being recruited by others as much of the industry has raised the proverbial bar.   If their compliance records are clean, they act as fiduciaries putting client interest above self-interest, and they continue to grow, these advisors are worthy of respect, support, and a seat at most any table.

What are the frustrations that most impact this subset of advisors? And if a smaller advisor finds that he’s not well-served, what other options exist?

Understanding the Frustrations

As large firms continue to manage to the lowest common denominator, advisors routinely complain that they’re feeling crushed by increased bureaucracy. And this squeeze is even more pronounced for advisors who manage smaller books of business. Whether the advisors are pushed to form teams, forced to adhere to minimum account sizes, or stuck handling administrative work due to a lack of sales support, the one universal theme seems to be a lack of control. And when an advisor is unable to service clients to the best of his ability, clients may not receive the best-in-class service they have every right to expect. But this doesn’t mean that these advisors are “stuck” receiving inferior service or increased limitations as a result of their size. While the wirehouses may no longer cater to these folks, there are options that exist outside the world of big brokerage, and these firms are hungry to recruit. When advisors find the right home, not only can they better service their existing clients, but in a domino effect, they will often accelerate their growth as well.

Related: Advisors and Their Affluent Clients are No Longer Looking the Other Way When it Comes to Independence

Related: The 6 Common Mistakes Advisors Make During a Move

Understanding the options for the sub-$1mm advisor considering change

Regional Firms

Regional firms generally welcome advisors with just about any size business with open arms. Firms like Raymond James and Associates, RBC and Janney Montgomery Scott are killing the recruiting game because they offer a client-centric culture, less bureaucracy, and more advisor support. But it’s important to remember that because these advisors are still employees, there is limited flexibility in the model.

The Independent Broker Dealer (IBD)

This space offers advisors much more control than being an employee– think of it as “control with guard rails” – and more flexibility, customization, and a greater opportunity for long-term financial gain. Firms like Wells Fargo Fi-Net, Commonwealth Financial Network and Securities America are just a few IBDs that are often comfortable homes for smaller advisors. The ability to conduct Outside Business Activities (OBAs) and market more freely is attractive to entrepreneurial-minded advisors. However, while becoming a business owner may sound appealing on the surface, it is not for everyone as it requires additional business management. Because advisors in this space are no longer employees, they have more freedom than at a traditional firm, but still must operate under the firm’s ADV.

“Tuck-in” to an Existing Firm

Another option within the independent space is what we refer to as a “tuck-in”, where an advisor joins an independent wealth management office that is already up and running. This “plug and play” opportunity will offer more freedom than the wirehouses but less than forming an RIA from scratch. Depending on how the firm is structured, the advisor may or may not be an employee. This model offers benefits similar to the IBD model, but with some additional flexibility and freedom, which is typically subject to the principal of the firm. Tucking in does not offer full control, but if it’s a good cultural fit, it can be the right home for many.

Form an RIA

Forming an independent firm from scratch offers the ultimate control and the chance to become a true fiduciary. By affiliating with a custodian and operating under their own ADV, advisors can customize the business with maximum freedom and flexibility. That being said, the advisor will have to do all the “heavy lifting” that running a business requires. Plus, custodial options may be limited for the sub-$1mm advisor, and pricing and scale may not be as favorable for smaller firms.

Ultimately, advisors must be self-aware, identifying their pain points and quantifying the impact on their business. While some may feel that the wirehouses are no longer the best place for them, many still feel well-served or that their current firm is “good enough.” And if that’s true, that’s great!  Surely, it’s the path of least resistance, and one should never put his clients – or himself – through the rigors of a move if it’s not going to significantly move the needle.

But for advisors who feel that their firm or model is hindering their business and ability to grow, they are not stuck. In an industry that’s changing daily, what was right yesterday may not remain so. And while the biggest producers may receive more attention at the wirehouses, there are plenty of firms and models hungry for advisors of all sizes.

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