Understanding the hidden economics of independence: Building the business you always wanted

Ask an experienced, successful adviser at one of the large national firms to be brutally honest about work, and many will quietly admit that it’s no longer as fun as it once was. Probe further, and advisers may say that the corporate culture they find themselves in is far removed from the environment existing at the start of their career, and that it saps the satisfaction they receive from serving clients.

As we’ve discussed in earlier columns “How smaller can be more cost-efficient than bigger” and “More than payout: How independence can build wealth,” about the hidden economics of independence, there is a strong case to be made for the higher payout and wealth-building opportunities that independence affords. Now, let’s talk about the advantages of independence that go beyond the pocket and address the heart.

Essentially, independence provides the structure and the economic wherewithal to build a business whose direction and culture reflect an adviser’s distinctive way of serving clients.

If an adviser prefers to serve a certain demographic market niche such as widows, corporate executives or doctors, for example, the business can be structured to serve that niche. If an adviser is planning oriented, that can be the direction. Or if a particular investment expertise is the niche — say, options or municipal bonds — there will be no manager thousands of miles away (literally, metaphorically or both) pressuring the adviser to act in ways that simply feels misguided.

Of course, it must be emphasized that advisers affiliated with a strong independent broker-dealer do not operate as anything-goes free agents. Compliance protocols and supervisory oversight are just as rigorous in the independent space as they are at employee-model broker-dealers. The difference is that compliance and regulation in the independent world oversee the type of business that the adviser wants to do, not the business that is encouraged through management “suggestion” or through compensation incentives and penalties.

Advisers new to operating independently often are surprised by how much they can shape their own operating environment. Aspects of the advisory job that typically were assumed to be givens, such as location and office décor, can be changed to suit the adviser and his or her business needs. For advisers serving older clients, for example, simply relocating to an office facility with ample parking and easy, no-step access can boost client satisfaction enormously (leading, of course, to more referrals).

The chief aspects of independence that allow an adviser to shape his or her work environment however, have to do with the freedom and financial ability to hire the people the adviser chooses and to use the technological tools the adviser selects to support the business the adviser decides to operate. Since people and technology will determine successful advisory businesses going forward, being able to shape those factors not only improves the odds of success, but also increases the satisfaction the adviser derives from operating the business.

In short, your business has the ability to look and feel more like your business.

Being able to define the mission or operating philosophy of your business, define the roles and responsibilities needed to carry out its objectives, and then finding the people with the right skills and temperament to handle those responsibilities and who create the kind of environment in which your entire team thrives can make coming to the office each day a pleasure rather than a chore.

Such a “soft” benefit produces measurable results. By doing the kind of business the adviser wishes to do – and working with colleagues the adviser selects and with whom he or she enjoys working – clients are happier and more satisfied. In fact many newly independent advisers have reported that clients often note the more attentive service and say they were not at all happy with the advisers previous affiliation and were delighted that he or she chose to go out on their own.

While independence may not be the right choice for every adviser, for experienced advisers who want to get closer to clients and serve them in ways both they and their clients deem most appropriate and most satisfying, independence provides a solution worth investigating – and an opportunity to re-discover some of the “fun” from earlier in their careers.

For more detail, download the Wells Fargo Advisors Financial Network (FiNet) white paper, “Independence Simplified.”