Many advisors know of colleagues who have left wirehouses or other firms and affiliated with an independent broker-dealer. They may not be as aware, however, that an increasing numbers of advisors are discovering that another path to independence — affiliating with a Super Branch — may be more rewarding financially and more satisfying professionally than affiliating directly.
Here are six reasons why affiliating with a Super Branch may be a better choice:
Advisor economics: Bigger payouts and higher income are key reasons advisors go independent. But affiliating with a broker-dealer as an independent means assuming the costs and responsibilities that go with being in business for oneself. In addition to expected business expenses — rent, office furnishings and equipment, and computer and telecommunications costs, for example — advisors soon realize they also will incur the high cost of health care coverage. Depending on geography and plans, these costs can substantially reduce net earnings.
As a function of their size, Super Branches typically can negotiate group health plan coverage at rates significantly below what advisors can secure on their own. Similarly, Super Branches can provide a range of business services that advisors would find more costly to buy independently. Super Branches also make the transition process much smoother by offering turnkey offices and equipment, eliminating the time-consuming and costly chore of doing it yourself.
The bottom line: Affiliating with a Super Branch may mean a better bottom line.
Compliance: At Super Branches, compliance and oversight are just as rigorous as the oversight at wirehouses and independent broker-dealers. But because the number of advisors overseen is smaller, compliance experts at Super Branches can become more familiar with each advisor's business and serve as an easy-to-reach sounding board before potentially troublesome issues emerge.
Moreover, in today's increasingly complex regulatory world, Super Branches are particularly well-equipped to manage the overlapping and often confusing sets of rules governing FINRA, SEC and, perhaps soon, DOL oversight. Many Super Branches offer their own Registered Investment Adviser (RIA) with which an advisor may affiliate. Others offer their affiliated broker-dealer's RIA. With the rules about fiduciary conduct so unsettled, many advisors will find extra value in the hands-on compliance expertise provided by Super Branches.
Culture: While often unstated, the specter of working totally on one's own is among advisors' biggest fears when contemplating independence. The Super Branch model presents an alternative. As a result of their entrepreneurial spirit and the business-building programs they provide, Super Branches offer a culture that embraces independent advisors and provides the sense of community that reminds many advisors of their past experiences at small broker-dealers and regional firms. Collaboration, not isolation, is the prevailing culture at Super Branches, where management encourages the sharing of ideas and working together for the benefit of advisors and clients alike.
Marketing and practice support: Because they have risen from the ranks of advisors themselves and understand their needs, the principals of Super Branches strongly support the business-building and business-retention efforts of their affiliated advisors. Unlike advisors who affiliate independently and must create their own marketing programs, advisors affiliated with a Super Branch can benefit from the branch's financial wherewithal to invest in specialized website development and other promotional efforts. Branches also often assist in lead generation and referrals.
In addition, Super Branches foster an environment where affiliated advisors are encouraged to share best-practices and success stories. Leading Super Branch-oriented broker-dealers create comprehensive business-building programs that support and promote the efforts of the advisors affiliated with their Super Branches. The offerings of these Super Branch-oriented broker-dealers include extensive live and online educational and training programs, as well as user groups for firms using the same software, and peer-group councils for branch managers and assistants.
On a day-to-day level, Super Branches often assume responsibility for many of the administrative and business operations tasks — hiring and paying staffing, renting office space, paying utility bills, etc. — that independent advisors affiliating directly usually must do themselves. In this important way, Super Branches function in the way that smaller broker- dealers do in the employee model.
Wealth creation and succession planning: One of the major reasons advisors choose independence is to realize the enterprise value of the business they create through its sale. Through the programs that many Super Branches have put in place, advisors enhance their ability to maximize that value, as well as plan for succession and retirement in ways that best meet their needs and enhance their financial wellbeing.
Many Super Branches help find suitable succession candidates for their advisors and arrange independently or through their broker-dealer to finance the succession and acquisition process. This helps older advisors nearing the end of their careers and younger advisors who would like to build their own business and benefit from the assistance available to acquire a business. In addition to providing or arranging for financial assistance, Super Branches often do the equally important job of finding succession candidates whose personality and business fit the practice's culture and philosophy.
Technology and infrastructure. The complexity and cost of the advanced technology solutions required in today's marketplace often puts those tools out of the reach of small or even mid-sized independent operators. Because of their scale, large broker-dealers and Super Branches can make, and have made, the investment in systems and technology solutions that enable newly affiliated advisors to make a smooth transition to independence, be productive immediately and offload the burden and expense of technology.
Takeaway: For many advisors seeking independence, not solitude, affiliating with a Super Branch can make economic and professional sense. Perhaps just as important, advisors now affiliated with Super Branches say they never have been happier.
To learn more about this business model, download
"Inside the super branch model: Why it works for managers and advisors."
