Is It (Finally) Time to Go Independent?

Is It (Finally) Time to Go Independent?

Going independent. You’ve been thinking about it for years, but something has always stood in the way.


The safety of a big organization. The familiarity with the people, technology, and processes. The comfort of not having to manage all the details of a small business. And yet you keep wondering: Is independence for me?

If those thoughts have crossed your mind, now may be the perfect time to explore your options. The reason? Not only could the move fatten your paycheck, but the industry is changing at light speed, and much of that change has created an environment that’s more supportive of independent advisors than it has ever been. Here are just a few things that make it worthwhile to ponder your next move:

The DOL fiduciary rule.


This has been coming down the pike for a while, and though some are hopeful that a new administration in the White House will delay or even stamp out the restrictions on commissions in retirement accounts completely, most everyone agrees that the shift to fee-based is inevitable—even if it doesn’t happen immediately. In the past month, many of the biggest players have laid out their plans for a post-DOL rule world. Capital One Investing, JPMorgan Chase, Merrill Lynch, and Wells Fargo have all said they are not allowing commission based product sales in retirement accounts. Morgan Stanley and Raymond James are among the few that plan to continue to allow commissions for IRAs (which may put them and their advisors at risk). Going solo gives you the freedom to make your own choice regarding commissions and fee-based business moving forward based on your assessment of the risks and your ability to manage them And with the rule set to go into effect April 10, you have no time to waste.

Hybrid fee options.


As a result of the pending DOL rule, commission-based firms have been scrambling to find solutions that help maintain their revenues while complying with the new regulations. Luckily, there’s been a boon in platforms that offer RIAs the ability to operate their own fee-based business while leveraging a broker-dealer for commission-based products. At the same time, some independent broker-dealers have created their own hybrid platforms to offer in-house custody and services or partnerships with "outside" fee-based custodial platforms. Both types of options ease the transition to a fee-based business—while keeping you in business in the interim. 

New technology and research solutions.


One reason many advisors chose to go with wirehouses in the first place was to gain access to top-notch technology and in-house research. But oh, how times have changed. As technology has advanced in the past decade, you’d be hard pressed to find a technology solution you can’t access as an independent. From clearing house, to asset management, to robo-advice platforms, technology is readily available—and at a price an independent firm can actually afford. The same goes for research. For advisors who take a more tactical approach to investing, smart, original research on the economy, stocks, and market trends is a vital part of the business. The menu of proprietary research providers seems to grow every day, so finding a firm that aligns with your own investment philosophy can be a simple task.

RIA-friendly products.


In the days when the wirehouses controlled the lion’s share of assets, most product sponsors geared their models toward these national firms. But as the pool of RIAs has grown, independent advisors have earned much greater influence. A 2015 IAA/SRS study estimated that there were 11,473 SEC-registered advisors at the time, managing $66 trillion. Any sponsor would be foolish to ignore those numbers. And they haven’t. Today, sponsors are designing products to work for organizations of any size and model—including broker-dealers, RIAs, and hybrids. When it comes to what types of products you can access for your clients, the sky is the limit – even as an independent.

The happiness factor.


In the end, this may be what matters most: What’s going to make you happy? Almost every independent who has made the move from a wirehouse environment will tell you that the primary reason they jumped ship was to gain the freedom to serve their clients better. No product restrictions. No sales goals. No commissions. Yes, going solo means you have to manage a small business, and whether that business is an ice cream shop or an RIA, being a small business owner requires a special skill set. You have to manage you own books hire your own staff, manage your own compliance, but you also have the freedom to control your own brand, set your own goals and, ultimately, be your own boss.

If you smile just thinking about it, it’s time to dig deeper, because from product to compliance to back office processing, it’s never been easier to go independent.

Bill Acheson
Investing in Life
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Bill Acheson is the Chief Financial Officer of GWG Holdings, Inc. Mr. Acheson has over 25 years of sophisticated financial services expertise. Mr. Acheson has extensive experi ... Click for full bio

An Advisor's Guide to Helping Women Become Savvy Investors

An Advisor's Guide to Helping Women Become Savvy Investors

Today, more women than ever are involved in managing their personal and household finances. In a recent study, nearly half of the women surveyed (44%) stated that they are solely responsible for their household financial decisions, compared to 35% of men1. But the study wasn’t all good news. While women may be taking the lead when it comes to their finances, they also reported that they are not confident in doing so. In fact, in every financial category included in the survey, men reported much greater confidence than women. Where was the biggest gap? You guessed it: investing.

For advisors, this presents a challenge and an opportunity. There is a 90% likelihood that a woman will be financially self-reliant at some point in her life due to divorce, becoming a widow, or choosing to marry later in life or not at all2. By taking steps to help your female clients become confident, savvy investors, you’ll not only be more effective at serving in the best interests of these women and their families, but you’ll also be able to build much stronger, more trusted relationships to help ensure each family’s assets remain in your care for decades to come.

Follow these five steps to help your female clients invest with greater confidence:


1. Urge every woman to put her financial needs first. 


Women do have a weakness when it comes to planning for the future, but it has nothing to do with a lack of knowledge, skill, or smarts. Their primary weakness is a willingness to put others’ needs first. This is a huge mistake when it comes to planning for the future. Investing for retirement simply can’t wait until the kids are grown or aging parents no longer need care. In fact, based on average life expectancies, women should plan to accumulate enough funds to last at least 20 years after retirement. The following chart illustrates the power of compounding based on an 8% rate of return to help bring that point home:

This hypothetical example assumes an annual 8% rate of return and does not take into account income taxes or investment fees and expenses. This example is for illustrative purposes only and does not represent the performance of any specific investment. An investor’s actual return is not likely to be consistent from year to year, and there is no guarantee that a specific rate of return will be achieved.

2. Educate women about the power of investing.


Security about any topic is rooted in confidence and knowledge. Educating your female clients about investment basics can help drive more confident decisions and more positive long-term outcomes. From the basics of compounding to the nuts and bolts of researching options and understanding the pros and cons of different asset classes, make it your job to help every client understand what she is buying—and why.

3. Dive into the details of asset allocation.


Asset allocation is by far the largest determinant of a portfolio’s success—even more important than the individual securities selected and timing of an investment. This is critical information for your client to understand as she pursues her financial goals.

Related: Need More Referrals? 5 Steps to Building Stronger Word-Of-Mouth Influence

4. Discuss how her investment strategy needs to evolve over time.


Part of every client’s financial education should be to understand how financial needs and goals change with each stage of life stage. Because a shorter investment time horizon creates greater vulnerability to market volatility, she needs to understand the impact of shifting a portion of her investment portfolio to more income-oriented investments as she moves closer to retirement. This Life Stages Guide can help you paint a clear picture of how allocation strategies need to evolve to fit her changing needs.

5. Be sure she’s covering all the financial bases.


Smart investing is vital, but missteps in other areas of financial planning can thwart even the best investment plan. Offer every client a basic planning checklist that includes these three important steps:

  • Focus on the big picture. Organize your important financial papers and schedule an annual review of your investment strategy with your advisor. Regularly monitor your net worth—including your assets (all investments and savings) and liabilities (mortgage, credit cards, and other debts) to be sure you’re always moving toward your end goal of a secure retirement.
  • Pay down any outstanding debt. Debt reduces your net worth, threatens your financial security today, and reduces your ability to invest for the future. Do whatever you can to minimize debt, and build an emergency fund to help pay for any unexpected expenses.
  • Make estate planning a priority. Once a year, review your will and your beneficiary designations for every account to be sure they continue to reflect your wishes. If you have children under 18, work with your advisor or estate planner to establish a trust and select a trustee to ensure your assets are managed for the benefit of your children.
     

As a trusted advisor, make it your mission to provide your female clients with the education and guidance they need to become savvy investors and make the smart, educated financial decisions. By doing so, you can help every woman you work with not only enhance her financial security, but also gain the confidence to take greater control of every aspect of her financial life.

Click here to learn more about IndexIQ.

[1] Survey conducted by Regions Financial Corp. in partnership with Vanderbilt University, 2015.

[2] The Simple Dollar, “Guide to Financial Independence for Women,” 2014. 

Disclosure: The information and opinions herein are for general information use only. The opinions reflect those of the writers but not necessarily those of New York Life Investment Management LLC (NYLIM). NYLIM does not guarantee their accuracy or completeness, nor does New York Life Investment Management LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are not intended as an offer or solicitation with respect to the purchase or sale of any security or as personalized investment advice. 
Laura McCarron
Building Smarter Portfolios
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Laura joined New York Life & MainStay Investments in 2009, and is currently the Director of Value Add Marketing. She is responsible for the development of investor educati ... Click for full bio