This is the time of year when I reflect on and appreciate our country’s independence. I find it humbling to consider the ultimate price that was paid by so many individuals so we can live in freedom. The corollary between our nation’s independence and my becoming an independent advisor is clear. Leaving the comfort and security of a large corporation involves a certain level of risk. However, as an employee of a big box firm, your freedom is somewhat limited.
Moreover, the rules of engagement are structured to fit those who, how shall we say it, are less than ethical. This “lowest common denominator” compliance can be extremely frustrating to the honest advisor. In fact, some of the rules might even be considered, well, ridiculous. This is why compliance is often referred to as the Department of Sales Prevention.
Perhaps you are reading this and considering a change. Perhaps you have been contemplating the independent model, but haven’t quite reached the point where you are willing to pull the trigger. If that is you, I hope this will encourage you to take the leap of faith, trust in your abilities, and join the ranks of the independent. To do this you must have a minimum base of clients, that is, unless you plan to live on beans and weenies. Let’s take a look at some basic numbers.
If you have a current book of business, remember, as an independent, you only need a small portion of your existing clientele to make a go of it. A typical payout at a large brokerage or bank may range from 20% to 50%. As an independent, you should expect to receive 85% to 100%. Using 90% as a guide, and a 1.0% average fee, each million dollars of AUM would generate $9,000 in annual income or $750 per month.
Depending on how much you require in support, independence may be easier than you think. Look at your current book, client by client, and consider which clients might be willing to follow. You may be surprised to find the number is greater than you think. Did your current clients choose to work with you because you work for ‘Company X’ or because of you? Some will prefer the brand name,’ but many will not.
Consider your future, and if becoming an independent advisor is for you, I wish you well. If I can help, please let me know.
Thanks for reading.