A Seamless Move to Independence?

Most independent firms offer standard products like the major firms, but platforms in the independent channels can be more flexible.

Wirehouse advisors switching to independent firms or who become Registered Investment Advisors (RIAs) don't need to worry about losing clients: We find that clients follow at the same rate -- whether advisors take the road less traveled or stick to the wirehouse and regional firm world.

That's because the differences in product offerings among traditional wirehouse brokerage and independents are narrowing as both vie for quality advisors. For the most part, advisors can assume they can transfer clients in various products from one firm to another fairly smoothly.


Most independents offer standard products, like SMAs, UMAs, mutual funds, stocks, and bonds. But platforms in independent channels, which pride themselves on their open architecture, can be more flexible than traditional wirehouse ones.


Advisors are less likely to need to battle the firm's manager research group to place money with out-of-the-box managers. They charge clients retainers for financial planning and keep most or even all of the fee.

Advisors switching to the fee-only RIA model, and who give up their Series 7 licenses, will need to offer clients load-waived shares of mutual funds and annuities. Most mutual fund companies have no-load equivalents, and annuity firms are developing them.


It is advantageous if the prospective firm has a dedicated transition team - most major players do. Wirehouse advisors who make the transition with the help of a dedicated group report high levels of satisfaction.


You need to be aware that smaller broker-dealers have fewer resources to support your transition. In any case, the advisor needs to carefully review each firm's platform, scrutinizing the product, client-reporting and operational capabilities.


In our experience, advisors bring at least 75 percent of desired assets to their new home. A study by Alois Pirker of the Aite Group shows that high-net-worth clients are more difficult to move to the independent channel. That could be few several reasons - including that the survey Aite was conducted last August when the market was crumbling.


Pirker also said that many high-net-worth clients may rely on teams of advisors; an individual might not be able to establish as firm a relationship. In our view, advisors who are providing clients with special services like high-net-worth loans or complex hedging strategies need to do an extra level of due diligence to be sure that the prospective platform can accommodate their clients.


Overall, the news is good for advisors seeking more choices and opportunities. And the news is equally good for advisors who have no interest in making a change: As more advisors opt for independence, wirehouses will devise clever strategies and incentives to persuade the talent they value to stay.

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Mark Elzweig is president of New York-based Mark Elzweig Company, an executive search consultancy that relies on cutting-edge technology to aid clients. He has worked with financial advisors and investment managers for more than two decades.

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