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Is the Fear of Instability Stopping You From Moving Forward?


Is the Fear of Instability Stopping You From Moving Forward?

Independence has become the industry’s hottest ticket, solving 4 key requirements with a level of stability that advisors are growing increasingly comfortable with.

Going independent seems to be the loudest buzz these days. It’s clearly where the puck is heading for more and more wirehouse teams—especially since 3 of the 4 major firms have announced plans to pull back on recruiting (at least for now). However, while the basic tenets of independence – autonomy, flexibility, control, creativity, superior take-home economy, empowerment – are particularly appealing to many, it is near impossible for the majority of even the most entrepreneurial advisors to get from “here to there”. That is, to build, launch and grow a thriving independent enterprise.

So what’s holding them back? Often it’s because the know-how, bandwidth and capital are in short supply. The reality is that building a new enterprise is not easy to do, especially while managing an existing book of business. Plus, not only having access to the money it takes to launch a new business, but also the possibility of eschewing transition money from a competitive brokerage firm can be a non-starter. While individual businesses and goals vary widely, in our experience, an independent-minded advisor’s needs can be boiled down to 4 key requirements—what we refer to as “The 4-Legged Stool”. This metaphor serves to illustrate that when one leg of a stool is broken, stability is lost, and the stool collapses. That fear of “collapse” feeds the inertia that stops so many advisors from moving forward.

Related: Financial Advisors: When to Stay Put or Make a Move

As you gain clarity on each of these 4 basic needs, you have a greater opportunity not only to solve for each of them, but determine whether independence is right for you at all, and if so, which model suits you best.

  1. Freedom – The ability to run your business your way, without worry that the rug can be pulled out from under you, is most appealing, especially in times of great flux in the industry. The leeway to customize everything from your brand, to who you service, how you service them, and what you charge is often a big part of every successful advisor’s greatest dream.
  2. Turnkey Infrastructure – Many advisors see the job of managing their clients’ money as a full-time endeavor in and of itself, and have little interest in building something from scratch. They’d rather focus on their core competencies and what they enjoy most. Having to find real estate, choose a custodian, vet technology providers, establish a compliance organization, and everything else that goes along with running a successful business is daunting—for many it can be absolutely paralyzing.
  3. Economics – There’s no doubt that money plays a large role in one’s decision-making process; net take home economics of 60 to 70% can be quite compelling. Typically, going independent doesn’t come with a big upfront check, but, depending upon the model, can offer exciting enough transition money to cover lost unvested deferred comp and startup costs.
  4. Ownership – Most entrepreneurial-types are looking to retain maximum upside earning potential and to own 100% of the equity in their business. While there are plenty of models that can provide for significant transition money, these come attached to an expensive price tag; that is, having to sell all or a portion of equity.

Luckily, as the independent space has emerged as the premier destination for countless discerning and sophisticated wirehouse teams, a few innovators have responded to these important needs. These “soft landing spots” as we call them – Dynasty Financial Partners, Wells Fargo Fi-Net, United Advisors Private Client Group, Kestra Private Wealth Management, to name a few – serve to provide wirehouse advisors with the “4-legged stool” they need to break away from the employee model. Essentially, these models allow advisors to gain independence while leveraging the expertise and scaffolding of a firm that has the bandwidth, know-how and capital to do so. This means that an advisor has access to a stable platform while remaining laser-focused on client service.

Still, there are plenty who are ready to take on the many roles required of building a business and don’t need or desire to pay for the additional services offered by these service provider models. And many more who, after exploring all modes and models of independence, will still wind up opting for the comfort and familiarity of a traditional firm. The reality is that you need to carefully examine your own goals to identify the right model – that is, the 4-legged stool – that will serve your needs at this juncture in your career.

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