Has Going Independent Become Much More Enticing for Advisors?

The recent DOL FAQ released on October 27th has driven recruiters and their advisors into a tizzy.

Howard Diamond of Diamond Consultants declared it the “most hectic week” they have ever experienced, and they’ve been leading the wirehouse recruiting game for over 15 years.


According to new interpretation by the DOL, wirehouses will no longer be allowed to offer back-end loaded deals to entice advisors and teams to jump ship at one wirehouse to join another. Howard declared this “the end of the world as we know it” in his recent article for RIABiz.

Many have been writing that this new DOL ruling/recommendation now makes “going independent much more enticing for advisors”. The new thinking seems to be, “If I can’t extract short term, incremental wealth in a recruiting deal, then I might as well go through the longer-term process of starting my own RIA to build a monetizable asset rather than just completing another short lap at a competing wirehouse.”

Putting aside “What would be best for my clients?” for a second, DOL or no DOL, advisors have always been able to make more money by starting an RIA; you just need to be patient.

Everyone knows that patience is a tough thing and we all would rather have a nice payout today than a larger payout at an indeterminate time, however RIA leaders that originated their business from their wirehouse roots have been well rewarded over time by playing the long game of being an RIA.

By starting an RIA, advisors open themselves up to an entire universe of sophisticated investment solutions for their clients – many of which would be banned by the compliance department at their former wirehouse simply because certain managers/products did not pay for access to that particular wirehouse’s distribution platform. With more investment solutions at their disposal, those advisors can attract more clients over time, which in turn leads to a greater AUM than would have been achieved at their former firm, which in turn leads to greater revenue…by playing the long game.

As the former COO of a large breakaway, and now as a third-party consultant working with these emerging entrepreneurs, I have seen first-hand how advisors ultimately end up with more referrals from their clients and achieve greater wallet share of their existing clients’ portfolios. Clients say to their newly-established RIA advisor, “I’ve never understood why you were a captive employee…I’m so proud of you for starting your own firm! I have 5 friends/family members I’ve wanted to introduce you to, but I’ve always been scared of the proprietary products and/or the cross-selling incentives at your former firm. Now that you are independent, I’m comfortable making more introductions for you. Oh, and by the way, I’m also going to send you a few extra dollars from an account of mine that I never told you about…” These conversations, to be had across the advisors’ entire book of clients, lead to a significant boost in AUM, again by playing the long game

All of these incremental assets brought under the RIA’s management will be more profitable to the advisor because they are no longer constrained to a fixed payout grid within the wirehouse. One of the fundamental benefits of the RIA model is that expenses do not increase dollar-for-dollar as AUM increases. Rather, operating leverage is created for advisors for the very first time in their careers.

Looking ahead several years/decades to when those advisors want to retire, imagine the business asset they now own. With a proven RIA business that has been growing over a number of years, advisors will have no shortage of potential investors/aggregators/acquirers to choose from. At our consulting firm, we have received three phone calls this week alone from private equity firms asking us about the RIA industry and the best way they can invest in it.

Sure, you can “sell your book” from a wirehouse when you are ready to retire, but there is more uncertainty selling a wirehouse book than an RIA business. Investors will pay a higher multiple for an existing RIA business, with its certainty of revenue, than they will pay for a book of clients that needs to be extracted from the wirehouse. Forgo the short-term check today, make the move to independence now, build a dependable revenue stream by playing the long game and command top dollar for your asset when you monetize at retirement.

We are not saying that this approach is easy, but with advice and guidance from those that have gone before you, the path is much more predictable and certain.


No truly successful entrepreneur has made it without hard work. If one thing’s certain in these uncertain times, starting an RIA enables you to do what’s best for your clients and make more money for yourself – the ultimate benefits of playing the long game.