Last time I wrote about the wave of entrepreneurialism that is rampant in the retail brokerage world. Of course, it's not for everybody. Some commentators have written that the “breakaway” Advisor is a “flood”. I disagree, but there is no question that Advisors at all levels are at least considering non-traditional options and smaller firms, as well as start-up firms, with greater interest than ever before.
Remember for the top level Advisor, there are solutions for you that are along a continuum from Very Big to Your Own Little Firm with a quite a few stops in between: Big firm, regional firm, boutique investment bank, national start up, regional start up, existing RIA, RIA/B-D hybrid, full independent B-D, full independent RIA. There are more choices than ever.
Some things to ask and some things to consider:
You might be good at running your practice, but are you any good at running a business? There is an infrastructure within your current firm that keeps the lights on, that keeps the computers running and virus-free, that executes trades, that creates statements (I could go on and on). Many of these things are provided by a custodian and various start-ups handle many of these tasks. As a starting point, you need to be aware what a Profit and Loss statement is likely to look like for your particular practice. Leaving a Big Firm might solve one set of problems but make no mistake that it presents another set of challenges.
Yes, the new situation might be good for YOU, but will it also be good for your CLIENTS? There is an entire industry sprung up to provide investment solutions for the smaller firms. You truly need to explore those in detail to ensure that the nuts and bolts infrastructure of what you need to provide to your clients every day is as good if not better than what you can provide at your current firm. I recommend that Advisors who are interviewing with “alternative solution” firms take a “case” with them from their office and see how the solution would look at the prospective new firm. For example, do a financial plan based upon a sample client (no names!) and then produce a Managed Money Solution; compare a municipal bond inventory for your home state on a given day to the available inventory at the new firm; examine the broker workstation in detail as if you were running your business during the business day; think of a problem that typically arises during the day and find out how your suitor would handle it.
Bottom line: Figure out what the problems are in your practice that keep you up at night and then methodically take the time to find the solution. You ask your clients to trust you to invest their money; don't you owe it to them to invest your time to figure out the best way to run your practice?
