How to prepare for the breakaway experience

Tis’ the season for tricking and treating and dealing with ghouls, goblins and monsters… or wirehouses.

It’s been said that the breakaway experience from the behemoths and large firms can often be a scary and daunting one, leaving many prospective RIAs to shake in their boots at the idea of what’s to come.

Have no fear, however, for several experienced RIAs shed some light on their own breakaway experience and how to prepare.

“Certainly, it is a bit spooky to make that leap from a wirehouse, or even if you were just with a small broker-dealer, that can still be daunting. I really think the big thing is having a compliance consultant,” says Derieck Hodges, founder and owner of Anchor Pointe Wealth Management.

“I wouldn't even call it much of a decision. I think it's a must. The landscape of the regulatory world continues to evolve, and now it's creeping into the cyber world, and it goes beyond just the compliance consultant. You have to have a great technology team and a great consultant to give you advice,” he says.

Hodges also remarks that it would be wise to consider and understand “what you're wanting to achieve, and understand what the duties and responsibilities are, and who is going to be in charge of those,” noting that he’s a man of many hats, acting as chief compliance officer as well.

Thoroughly understanding the contractual obligations and restrictions with the current firm, including what you can and cannot do with client information and accounts, as well as, developing a well-established transition plan to handle the workload and procedural challenges of moving clients and accounts, will also be critical to the breakaway experience.

Hodges notes that if he were to do the experience all over again, he wouldn’t go fully solo.

“There's still a lot of procedure that you have to follow, and staying up on all that procedure is a task,” he says. “I think I would have been part of a bigger RIA who had a lot of that stuff [already] established.”

When Larry Sprung decided to break away from his large bank environment at BoA after being acquired by Merrill Lynch, he encountered a "perfect storm" of timing that worked in his favor.

The founder and wealth advisor at Mitlin Financial recalls when the firm wanted new non-solicitations signed.

“The day my non-solicit was due, I handed in my resignation,” says Sprung.

He emphasizes the importance of having an employment attorney review agreements to understand the nuances of what is and isn't permissible. “He outlined what I could and couldn’t do and I followed those to a T in terms of the transition.”

"I think the most important piece that advisors have to understand, and they should do this, whether they're looking to break away or before they're joining somebody new, is to have an understanding of what they're signing," he added.

Meanwhile, Jim Gold, CEO of Steward Partners, asserts talking to peers and learning from them is the best way to start the transition to independence. 

"Learning peer to peer is the best thing you can do because you know that there's 100 percent truth in what they're telling you,"he notes. "It's not a spin by a company on how great it's going to be when you get here."

Finally, John O’Connell emphasizes the broker protocol allows advisors to take client contact information, so the focus should be on maintaining strong client relationships.

 “Don’t be afraid of the Big Bad Wolf,” the founder and CEO of The Oasis Group, says.

“The Big Bad Wolf will threaten you and everything else, but the broker protocol really does rely on the relationships that you have with your clients,” he added. “If those relationships are strong, you have nothing to fear whatsoever. They're going to follow you because they really believe in you.”