The allure of independence is real but look before you leap

Autonomy is invaluable and has been the status quo in my 37-year investment industry career. Independence allows you to tailor investment choices to clients’ needs without being limited to a set list of products. You get to choose many aspects of your work week – set your own schedule and fees as you thrive in an environment not defined by sales quotas or pressure to sell high-commission products.

Independence is not a siloed experience, however. The relationship between you and your broker-dealer matters more than ever because independence is not about flying solo – it’s about sitting in the captain’s seat, with a trusted co-pilot by your side. When considering independence after decades of fruitful growth, recruiters from leading broker-dealers will woo you and promise perks and benefits. These independent brokerages are growing quickly – as Financial Planning reported last year, 6,545 advisors managing $295.3 billion in client assets represented the 18 largest transitions in the sector.

Here’s what firms don’t say: True freedom to operate as an independent advisor cannot be realized without key components. To make the relationship work, these key components must be in place to ensure that you – the advisor – are on a superior path that puts clients first.

Keys to independence

Two is better than one. As a long-time independent advisor, it’s often the case your practice is a local firm that’s accessible to your clients and their community. The proximity and familiarity of your practice to clients is what drives your business. The flexibility to meet outside of regular business hours is just one example of personalized service done right. Corporate mandates on where to meet your clients no longer apply, which is why during the pandemic I met with my clients in the parking lot outside my office, upon their request.

“Local” should not mean “outdated.” Your office might be in a two-story, brick commercial building with gingerbread roof lines and art deco features, but technology and compliance support should be 21^st century. Make sure your broker-dealer stands ready to replace the outdated systems you once used, helping you stay current and adaptable in an independent practice. Ensure your broker-dealer provides state-of-the-art portfolio management tools, secure client communication platforms, and comprehensive compliance support to stay ahead.

The importance of personalized service. When considering the leap to a new broker-dealer as an independent advisor, never settle when it comes to service. In my experience, personalized service is more feasible with a boutique broker-dealer. Having worked with differently sized broker-dealers, I know that you can receive direct, knowledgeable assistance at smaller firms without the impersonal touch of larger firms.

The level of service you receive should be key in your decision to switch firms. It has proven to be worth the effort of transitioning. Having access to decision-makers and avoiding the frustration of repeatedly explaining issues to different representatives has enhanced my efficiency and client satisfaction. Check out the C-suite and find out who’s available to speak to you at a moment’s notice. The importance of being able to reach out to key decision-makers for assistance and solutions cannot be overemphasized.

Maximizing investment choices. As previously mentioned, one of the most significant advantages of being an independent advisor is the ability to tailor investment choices to the unique needs of each client. Unlike advisors at other firms who may be restricted to a predefined list of products, independents have the liberty to explore a wide array of investment options. This flexibility ensures that we can always seek out the best possible strategies rather than being confined to pushing high-commission products that may not align with our clients' goals. This autonomy enables us to build trust and foster long-term relationships, providing guidance that puts the client’s interests first.

Support from the right firm enhances the independent framework by offering additional resources and solutions that complement an advisor’s strategies. Yet, what’s remarkable is the lack of obligation to utilize these resources. We retain our independence, making choices based on what benefits our clients rather than fulfilling corporate mandates. This balance of support and freedom is a cornerstone of effective and ethical financial advising.

For decades, autonomy has fostered strong client relationships and made possible the longevity of my practice. Personalized attention is crucial for clients. Similarly, if we are to succeed on our terms, as advisors we should expect nothing less than this level of attention from our firms.

Mark Stofan is a financial advisor and President of Stofan Agazzi Investments at Stifel Independent Advisors. He is based in Joliet, Illinois.