Institutional advisors: do you know what you need in order to best serve clients’ needs and your own business goals?
Institutional advisors – those whose clients are charitable organizations, corporations, retirement plans, Taft Hartley plans, municipalities, government entities and the like – represent a relatively small percentage of the financial advisor population at large, but typically, they have very successful businesses and are highly coveted by the competition.
Generally speaking, these advisors run their businesses from one of two different places: a wirehouse firm or some form of independence (an independent broker dealer or RIA). The world-class resources, support, favored nation pricing, scale, guardrails and brand of a major firm can give institutional clients – and the advisors that serve them – a sense of comfort and stability. Alternatively, more and more of these institutionally-focused advisors are finding their way to the independent space—either establishing their own firm or joining forces with an already established one.
Truth be told, in today’s day and age, platform is largely a commodity and so there isn’t much that an advisor couldn’t access in the way of product or service, whether he is independent or an employee of a bulge bracket firm. The decision around where to run one’s business should come down to the following:
Some folks operate under the belief that even though they would love to become an entrepreneur and feel limited by their employee status, their institutional clients need the deep pockets of a big firm in order to stick with them. And while many hold to this belief, it just isn’t true.
So what is the truth when it comes to the institutional space?
Ultimately, the changing landscape has brought an evolution and much to be explored in the way of new opportunities for an independent institutional practice. And of note:
At the end of the day, some people are just more comfortable as an employee, especially given a more onerous regulatory environment. They have no desire to manage the minutia of running a business, or to take on the attendant risk; the easy access to best-in-class resources and solutions is what they value most. There is no judgment in that statement at all. From where I sit, it’s why Baskin Robbins makes 31 flavors of ice cream.
It’s all about choice. Don’t stay put because you feel jailed by the belief that, “My institutional clients would never get comfortable with me leaving a major firm and going independent.” Clients are far more dedicated to honest, hard-working advisors who they recognize act as fiduciaries with their best interests at heart than they are to the brand name on their monthly statements. Consider, first and foremost, where you can serve them best and use that as your guidance going forward.