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How to Approach Independence as a State of Mind, Not a Model


How to Approach Independence as a State of Mind, Not a Model

Advisors define what makes them feel “independent” in more ways than one.

The word “independence” in this industry has come to represent equity ownership, entrepreneurship and the notion of “going out on your own”. But for many advisors, independence is less about a particular model like an independent broker dealer or RIA and more of a “state of mind”. To these advisors, the word “independence” more accurately represents the freedom to solve for what is most important to them, to be liberated from what they see as negative and to create a business life that is most ideal.

This is why we are witnessing advisor movement in every direction—not only wirehouse-to-wirehouse or employee model to independent business owner. It’s less about the particular model, and more about what can be achieved. This is true independence.

Understanding the “Independent Mindset”

Most advisors I have met seem to naturally have that “independent” self-governing mindset. They tend to be self-starters who value the ability to think independently both in terms of how they work with clients and with whom they choose to work.

Some advisors place a lot of value on the ability to choose the products and investment approach that they believe best serve a client, yet not be particularly entrepreneurial. For those advisors, regional firms may offer the additional independence where it matters most to them.

Or consider the advisor who values above all else the ability to focus his time and energy on client service and business development—his definition of independence may not be in taking on the responsibilities of business ownership. If he cannot create the optimal business environment as an employee, he may see independence in a solution that offloads those responsibilities to a service provider like Dynasty Financial Partners.

The advisor who wants to create a succession plan may be looking to secure his future and those of his clients and staff by developing a next generation, and in doing so, find a sense of independence from the stability and continuity of having a successor.

Advisors in the RIA space who self-supervise can create a compliance culture and process that is customized to their particular business and client needs, and as a result experience greater independence than they might see in other models. Yet other advisors would never want to take on any compliance responsibility or additional risk, and may prefer to come under the supervision of a compliance department.

Can an employee be independent?

For some advisors, being an employee may actually represent greater independence—that is, being freed from the risks and burdens of business ownership. They may also derive significant benefit from leveraging a firm’s brand recognition or cache or value tapping into the referral mechanism of a retail or investment bank. We are even seeing principals of independent firms sacrifice their business ownership and equity in favor of moving to a traditional firm for greater security and support. Often the driver is an interest in achieving financial freedom by monetizing what is typically their single biggest asset.

Given the changes in corporate culture and compliance, as well as the wide variety of independent models available, there’s no doubt we will continue to see advisors migrate out of the employee world. But independence comes in many shapes and sizes, and carries a different meaning for each and every advisor. Understanding how you define independence in your own life will allow you to choose the right path, and in this way discover the truest sense of independence.

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