From the June 2012 issue of Research Magazine • Subscribe!

May 24, 2012

Exploring Independence: Ex-Wirehouse Advisors Carve New Paths

Independent advisor Brian Solik has developed the ultimate anti-Wall Street niche: how to protect yourself from Wall Street and the IRS.

On his website, independent advisor Brian Solik bluntly describes himself as a “former Wall Street broker.” In a video aimed at prospective clients, the 50-year-old Solik expounds on investment options “you may not have heard about from your Wall Street advisor.” And a squib about his financial philosophy includes a shout out to non-stock investment strategies.

Talk about reinventing yourself. After working nine years at a major wirehouse and losing faith in the stock market, Solik has developed the ultimate anti-Wall Street niche: how to protect yourself from Wall Street and the IRS.

His firm’s tagline, “Take Control. Protect Your Future,” pretty much sums up his guiding principles — and his career path. Any regrets?

“None at all,” says Solik, who moved to the independent channel in 2009 and now operates Wealth Preservation Strategies of NJ in Toms River, N.J. “I can still do Wall Street. I can still offer Wall Street investments. I’m not missing anything. Now, I’ve broadened my strategies, my education, my offerings. I’m a much more thorough advisor than I ever was. I would never want to go back.”

For a lot of former brokers, the transition to the independent space has resulted in creative, new business niches as they redefine themselves in ways that would have been largely undoable as brokerage employees.

As consultant John Furey, who heads Advisor Growth Strategies in Phoenix, notes: “It’s a transformational event. It’s liberating. When they go independent, they are now able to really build that defined niche and grow assets in the way they choose. It allows for creativity. Once you have complete control of your business, you can be creative in a variety of ways. It’s a canvas for you to paint.”

Russell Gebhard founded Houston-based Sovereign Investment Group in 2005 after experiencing eight Wall Street mergers over an 11-year period. “When I ended my career with the wirehouses,” he says, “I’d come to realize that the brand name on the card isn’t really the important part, it’s the relationship.” Today, his LPL Financial affiliate supports 24 ex-wirehouse advisors who manage over $800 million in client assets.

While he continues to cling to the vernacular of the traditional wirehouse — “book of business” and “broker” — Gebhard says that in his waning days as a broker he’d become an “anti-management guy” disillusioned by the constraints of his workplace.

With Sovereign, Gebhard set out to create the place “I’m thinking of in my head — a place that took all the good parts of the wirehouse and left the oppressive management, the quotas and the conflicts behind.” Not only does he strive to provide a robust infrastructure for his advisors, Gebhard assigns huge importance to two other components that make up the firm: transparency and opportunity. “Sometimes I think ‘What would they do over there?’” says Gebhard, referring to the wirehouse model. “I want to be the opposite of that.”

The jump to independence can represent an end to “same old, same old” — a trigger that often leads advisors to fresh thinking about what it is they do every day and why, according to Philip Palaveev, president of Fusion Advisor Network.

“It’s an invitation to start fresh, almost like selling a house and moving to a new one. You throw away the junk and buy new furniture,” he says. “In the process, advisors often discover they already have a nascent niche in a specialized market. It’s not like they wake up one day and say ‘I wish I could work with airline pilots.’ They realize they have a few airline pilots and decide they want to grow that.”

It’s also an invitation to conduct a crucial self-inventory, adds Palaveev. What makes me different? What makes me qualified to address this niche? How will I develop it? Here’s a snapshot of five advisors who unleashed new niches as a result of going independent.

The Niche: Equity Indexed Annuities and Cash Value Life Insurance

Brian Solik didn’t all of a sudden decide one day to go looking for, as he puts it, “a nice fancy niche that would be popular.” It found him. “I had started to lose faith in Wall Street in 2008 and 2009 and I started to question why Wall Street was always bullish. The obvious answer: That’s what they sell.”

At about the same time, the wirehouse where Solik worked changed its commission structure. “I was not going to change my strategy just to meet a quota,” says Solik. So he left.

“I just didn’t trust Wall Street investments. I wanted to know what else was out there,” he adds. “I want to have the freedom to do what’s right.”

Solik, now affiliated with TFS Securities, began to research equity indexed annuities and cash value life insurance as ways to protect clients against market gyrations and the IRS. He liked what he saw.

 “Cash value life insurance can be set up properly for tax-free withdrawals while equity indexed annuities provide a tax shelter. They both can be very conservative, and no one I knew in the brokerage world was doing it,” he notes. “It’s a huge part of my business. And when the markets are going up and down and people are flipping out, no one is giving me a call wondering if their principal is at risk. It’s wonderful.”

 The Niche: Non-traditional Assets in Retirement Accounts

With the fluctuation in the stock market, advisor Laurie Bachelder five years ago identified what she calls an “explosion” in demand for true non-traditional investments. Opportunity, right? The problem was that she couldn’t convince her independent broker-dealer to support her new niche.

 “It was like I had three heads,” says the 42-year-old Bachelder, who in 2007 formed a fee-only RIA called NUA Advisors through TD Ameritrade plus several special asset custodians in order to invest in non-traditional assets.

Since the creation of the Individual Retirement Account in 1974, Americans have been able to invest their tax-deferred retirement accounts in almost any asset of their choosing including non-traditional assets such as real estate, show horses, cows, domain names and sports teams. Exclusions include life insurance and collectibles. Yet, Bachelder says, the vast majority of advisors routinely steer clients exclusively to stocks, bonds and mutual funds.

“It’s an option that is ideal for individuals who do not have cash on hand to invest, who want to diversify their portfolios, or simply want to invest in assets they know and understand. If you own dressage horses and you’re not comfortable in the stock market, why not invest in dressage horses? Our specialty platform wasn’t intended to replace traditional investing,” adds Bachelder, who is based in Portland, Maine. “It simply adds balance.”

This year, NUA Advisors will roll out nationwide a program called A2, or Advisor to Advisor, under which it will handle non-traditional assets for other advisors. “It’s not just educating the public, it’s educating the professionals,” says Bachelder. “We want to make sure everyone has a chance to do this.”

The Niche: Eastern Iowa’s Retirement Expert

As an advisor at a national bank brokerage, Craig Adamson had no fulltime assistant and worked 16 hours a day. That was mostly okay. The Marion, Iowa advisor loved working with clients and embraced the new financial planning software that the firm had introduced.

As time went on, however, the assistant Adamson had been promised failed to materialize. He was unable to charge a fee for the financial plans he created. Worse yet, he says, he was hammered in performance reviews for spending too much time with clients.

“For me, the biggest thing about being independent is when I talk to somebody, I don’t have to sell them anything. At the bank, I knew I had that hanging over my head. I knew what my reviews were like. I was successful,” says Adamson, a two-term Marion city councilman. “It just wasn’t fun.”

When Adamson, 39, founded Adamson Financial Planning 11 years ago, he did it with the goal of becoming his region’s retirement planning expert. At the moment, he oversees $25 million in assets for 150 clients.

“This was what I was born to do,” says Adamson, who affiliated with LPL Financial. “And now I can hold myself out as unbiased. There is no proprietary product line-up. Now I can use everything, it’s just a matter of figuring out if you need it. I left the bank on a Friday the 13th. It seemed like a good omen. That whole day I felt like a new person.”

The Niche: Exit Planning for Business Owners

At his 26-year mile marker in a career at wirehouses, Peter Roth was a successful sole practitioner with $160 million in assets under management. Here’s what he didn’t have: no niche, no continuation plan for clients and no equity in his business.

Two years after establishing Kingwood, Texas-based Roth Financial Partners through Raymond James Financial Services, Roth has a team that includes nephew Kevin Roth, a mergers and acquisition specialist who heads up business development. Assets have jumped to $198 million — largely attributable to a new niche: exit planning for business owners. He also has a continuation plan for employees and clients, and he’s got equity in the business.

Roth, 58, says that owning his business has allowed him to have more meaningful conversations with business owners as they exit their own enterprises. And, as many owners remain concerned about the ongoing nature of their businesses, clients have come to appreciate the forward-thinking team-based structure now in place at Roth Financial.

Now that he is a business owner responsible for payroll, health care and employees, Roth says he has an entirely different mindset than he did as a wirehouse advisor. “I now think the same way as the independent business owner. I am that guy. I can relate emotionally and strategically with what’s going on in his head. It’s hand in glove. It’s a great fit,” he says.

“This has unlocked a door for me. It’s really fun to dig my teeth back into something new. I’ve got the passion back. I’ve got the energy back,” he adds. “When you’re back in love with what you do, it’s exciting to go out and look for new money. With a niche, I’m doing it smarter.”

The Niche: 401(k) Specialist

Raymond Rodriguez had a great ride with wirehouses as a producer and branch manager but after three decades he and a partner formed an independent advisory firm so that they could offer a more robust platform to clients.

“I saw opportunities out there that I wasn’t able to avail myself of,” says Rodriguez, a partner with Private Group Wealth Management in Corpus Christie, Texas. “I kept having this sense that there was more I could do for my clients.”

He had no idea at the time how much more.

 After starting his Schwab Institutional-affiliated RIA in 2005, Rodriguez, now 65, detected a weakness in the retirement advice his clients were getting about their 401(k) plans. So what does he do? He becomes a 401(k) specialist.

“A lot of plans we approached weren’t being serviced properly, weren’t being provided with a broad range of investment options, and they certainly weren’t being given the option in many cases for low administrative costs,” notes Rodriguez, whose firm has $60 million in assets under management. “What it boiled down to is you’d see plans that didn’t provide a broad range of options because they were locked into packages tied to a broker-dealer.”

Over the past few years, Private Group Wealth has become a force in the region’s 401(k) market — creating tailor-made plans that are also highly competitive. The firm currently represents five plans representing 350 participants.

“You see an investment opportunity or a vehicle and you ask yourself: How can I improve that? On the broker-dealer side you can’t do that; on this side you can” says Rodriguez. “As small as we are, we’ve started to accelerate our growth. I think we could be over $100 million in assets under management in the next couple of years. In the 401(k) area, we’ll go up against anybody. Chances are high, we’ll beat ‘em.”

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