The logistics, the legalities and, of course, the expenses involved in setting up an independent advisory firm make many advisors hesitate to move from an employee-based model to an independent model, be it an independent broker-dealer, an RIA or something in between.
But Alan Harter, managing director of Pactolus Private Wealth Management, urges advisors who are thinking of taking the great leap forward to stay focused on the great opportunities that independence can yield, because today, there are many companies that provide stellar support systems for advisors who want to go independent. Hooking up with one of these and leveraging their services enables advisors to not only create the kind of unique business model they want, but also to sustain these and scale them up significantly over time.
When he set up Pactolus in 2011, Harter — who spoke on a panel entitled “Unusual Business Models” at the recent “Going Independent and Beyond” virtual conference hosted by ThinkAdvisor — chose to go with Dynasty Financial Partners, an integrated platform service provider that has “tucked in” 49 advisors to date with $18 billion in assets.
Dynasty provides a complete suite of services, ranging from real estate functions to integrated technology solutions and back-office services, to help independent advisors start and grow their businesses. As with other similar providers of “going independent” services, the firm helps newly independent advisors select custodians, design promotional material, get access to macroeconomic research and even provides debt services if an advisor requires capital.
In short, “we have a central service model where every firm in our network has someone delivering what they need in terms of core services and integrated back-office services to help them grow,” says Shirl Penney, Dynasty’s founder and president, who also spoke on the panel. “About half the advisors [in our network] came from a captive/wirehouse model and had decided to launch their own brand and firm; the other half were already independent but serviced by 25 vendors and were spending too much time on administration and back office. They wanted a growth partner to simplify back-office work and give them more scale and allow them to be part of a community that shares ideas and best practices.”
Today, more and more independent advisors are joining these kinds of communities — networks, as it were — through which advisors retain control of their unique business models and destinies, yet can count on the services and capabilities of companies that understand their desire to be independent and that believe in supporting those unique businesses.
“We look at all the different business models that our advisors have and we say ‘how do we fit into your box, how do we fit to your model?’” said panelist Jeff Vivacqua, first vice president of business strategy at Cambridge Investment Research. “We don’t have an active involvement in their practice: They own it and they control the journey.”
Tools and Services to Support an Advisor’s Vision
Vivacqua believes that the majority of next-generation advisors will be independent and that they’re going to need the support of companies, like independent broker-dealer Cambridge, that offer commoditized tools and services to support the vision they have for their businesses. Cambridge’s network comprises more than 2,500 independent advisors with $57 billion in assets (and its reps named Cambridge one of Investment Advisor’s Broker-Dealers of the Year).