Written by: Matt Regan | Wealthcare
Congratulations! You’ve made the decision to go “independent”. You will be released from the shackles of the wirehouse, the tyranny of the large ‘independent’ broker dealer, or the ‘captive’ W2 channel of the regional brand name wealth manager. No more selling the ‘house coffee’, no more minimum production goals, no longer answering to the branch manager, the jackbooted compliance regime, or home office supervision.
What in the world have you done?
Actually, you’ve made a great decision, one that can provide you the ability to run your wealth management practice the way that you feel is most beneficial, free from conflict and without the pressure to comply with a large enterprise that dictates the approach and the tools and services you use and offer. Most importantly, you have made a decision that is likely best for you and your family because you have the opportunity to build real enterprise value in your business, to create a valuable asset that you can ultimately monetize in a way that would have never happened in the captive channels.
Your clients will follow you, your relationships with them will deepen, and the advice that you will provide them will not be tainted by an affiliation that may have been biased or conflicted. It will take some time, there will be some long evenings and some anxious moments, but in the end the decision to enter the independent channel will be a great one.
If you can find some help.
One of the great things about the wealth management business today is that there are myriad solutions that support advisors moving towards independence. Technology providers, third party recruiters, platform RIAs, business consultants, TAMPs, private equity backers, lending institutions, referral networks, marketing firms that specialize in the space, custodians, ‘friendly’ broker-dealers.
How do you even get started?
It’s important to first understand that there are multiple flavors of ‘independence’. Figuring out which model of independence is right for you is the first step. Finding a service provider that supports that model is next, and working with that service provider to decide what your specific value proposition will be is third. From there, as you build your firm, you can decide what is the highest and best use of your time and talent and find outsourced solutions to handle the tasks that can be best left in the hands of your strategic partners.
When it comes to your specific model of independence, the size of your practice can often dictate the decision. Firms under $500 million in assets under management (AUM) often don’t meet the scale that makes sense for the establishment of an independent RIA. The filing requirements and regulatory burdens that RIA firms must meet can become too much of a distraction, and better solutions exist in the marketplace for firms that don’t meet that size. A platform for supported independence, of which there are a number, will be happy to hold your registration, provide you the compliance support you need and allow you to operate under your own brand, creating an independent practice that is truly your own, while saving you the burden of registering directly with the SEC.
These platforms can also help you to navigate the development and implementation of your ‘tech stack’, your CRM, planning software, portfolio management and performance management system, your automated billing software, and your trading and rebalancing tools. They will have access to third party investment management solutions, and often can accommodate your own investment models, if that is your area of expertise. Some platform RIAs provide access to ‘virtual admin’ services, providing you some backup for administrative and operational support.
So how do I pick a partner?
There are many great solutions in the marketplace and service providers that will help you to build your practice successfully over time. I would make the following recommendations when choosing an outsourced partner for supported independence:
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Flexibility is key: Access to multiple custodians, multiple affiliation options, a wide range of investment solutions and the willingness to accommodate the tools and tech that you have become comfortable using is important. A true outsourced partner should not dictate your choices but should have a full menu from which you can choose.
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Boutique is probably better: Having access to the team that supports your business, particularly for a smaller emerging practice can be critical. Becoming independent advisor number 20,001 at a large IBD is probably not the solution for you.
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Alignment is critical: Different outsource partners specialize in different things. If marketing and branding is important to you, find a firm that provides that expertise. If deeper financial planning expertise is a hole in your game, find a firm that specializes in a planning first approach. If you aren’t a stock picking guru, find a partner with an investment choice framework. Line up your skills and interests with your service providers strengths.
Good luck to you! You’ve made the right choice, it’s time to build your brand, grow your practice, and create value for your clients and your family.
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