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Testing the breakaway waters

Four questions for advisers contemplating a move

Sep 4, 2019 @ 9:22 am

By Paul Simons

Breakaway, transition, "going indie" — no matter how you characterize it, a wave of financial advisers is moving away from traditional wirehouses and big-name brokerage firms in favor of launching or joining more independent-minded businesses.

This trend, which began a decade ago in the wake of the financial crisis, continues to gain momentum. According to Cerulli Associates, independent and hybrid investment advisers are likely to comprise 28% of the market by 2020.

But the wealth management landscape is not a binary choice between wirehouse or independent RIA. Between those opposite ends of the spectrum are smaller national firms, regional broker-dealers, hybrid RIAs and other business models that support thriving financial advisory practices.

Today, the industry's 300,000 advisers have more choices than ever before when it comes to the kind of business they want to run or join. And in some cases, shifting to a new model can resolve challenges or remove obstacles that are interfering with growth or other professional goals.

If you're an adviser considering a move to a new kind of firm, these four questions can help you begin to chart a course.

1. What are you trying to change about your experience? First and foremost, determine the reasons you feel compelled to leave your current firm. Do you feel there is a better financial opportunity in a different kind of business model? Are you looking to distance yourself and your practice from a troubled brand? Are you craving the entrepreneurial challenge of building something new?

Each advisory model has advantages and drawbacks. Before making the leap to a new firm (and asking your clients to leap as well), make sure you have a clear understanding of what you want to accomplish by moving.

For example, if you want to spend 90% of your time working directly with clients, launching a new business that will demand your time and attention for tasks like staffing, marketing and administration will probably not help you achieve that goal.

[More: Independence means different things to different people in wealth management]

2. Who are your clients, and what do they need? Each client relationship is unique, but clients of similar means and circumstances tend to require similar products and services. Moreover, clients want to be assured that you are equipped for and experienced in serving their particular needs.

Thus, if you work primarily with ultra-high-net-worth individuals and families, you will need to join a firm that has a reputation for serving that type of clientele. Make sure you are moving to a place that is committed to and experienced in serving the types of clients you serve.

If your clients are business owners, you should also aim for a firm that can address both their personal and business needs, including lending, banking, cash management and trust services, among others. If you hang out a shingle or join a small independent firm that is not able to meet all of your clients' needs in a holistic way, then a portion of your relationship will always be under siege from a larger enterprise.

As you consider a move, keep in mind the needs and preferences of your clients, and how you will approach the transition in terms of their best interests.

[More: Why aren't more women advisers making the leap to independence?]

3. What kind of resources do you need? Related to the above question, what do you as the adviser need to have at your fingertips in order to run your practice smoothly? Do you need physical offices in multiple cities, or are you focused on a single geographic region? Do you prefer having an in-house research team, or are you open to contracting with a third party?

Different business models will offer different levels of resources. And if you're considering full-fledged independence, do you have the experience and knowledge to assemble the infrastructure and support you need — everything from office furniture to an investment platform — to do your job effectively without significant disruption to your clients? All said, you must ensure that you can access the resources you need to serve your clients.

4. How will you grow? Moving to a new firm is a major long-term decision, and one of the most critical aspects of planning for the future is establishing a path to growth. Wirehouses or integrated firms offer multiple distribution channels that support client acquisition, such as retail banking and lending services to cross-sell and upsell prospects.

In a more independent environment, how will you attract new clients to your practice? Geography matters here, as well. Is there a robust enough market in your desired location to support your goals for growth? Outside of the handful of major markets where wealth managers are concentrated, this might not be the case. Whatever you decide on, having clear opportunities for client acquisition will be essential to helping you grow and scale as an adviser.

For successful financial advisers, moving to a new firm is more complicated than simply accepting a job offer from a different employer. You're asking your clients — who may not have a nuanced understanding of the industry — to trust that this change will serve their best interests.

The good news is, whether you find yourself leaning toward one end of the spectrum (going big or running your own shop) or seeking a happy medium, there is an option for you. In order to ensure a transition that satisfies your needs and those of your clients, make sure to explore the variety of options with a critical eye and a clear set of objectives.

Paul M. Simons is president of private banking, wealth and trust for Boston Private.

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