As I reflect on the days when I worked with a large brokerage firm, I am reminded of the myriad of onerous rules that were placed on all client-facing advisors and support staff. Many of these rules were the result of actions taken by a few rogue individuals who cared more about their paycheck than the client’s well-being. As a result, compliance came to be known as the “business prevention” department. 

Even though I understand why this occurred, it didn’t change the fact that conducting business in a sensible manner seemed a bit difficult at times. I suspect this has also been a catalyst in the exodus of wirehouse and bank advisors who have opted for independence. Once an advisor gets a taste of independence, I suspect very few return to their former world.

I have had an unusual number of advisors contact me lately via email with questions about independence. Unfortunately, I haven’t had the time to respond to all of them. I will eventually, but perhaps not as timely as I, or they, would like. 

The burning questions seem to center around my relationship with TradePMR, my custodian, and about the independent world in general. I certainly understand that many questions arise when an advisor considers becoming an independent. I also realize these questions are crucial to making a good decision. 

If you are in such a situation, I would suggest reading some of my past writings, including two articles I wrote for Investment Advisor magazine in 2014. Beyond this, you could go to my website and send me an email and I will do my best to respond. I am willing to help, but time constraints are an issue. With this in mind, here are three considerations for those considering a move to independence.

1) Decide if running a business is what you really want to do. Some of the best practitioners are not good at running a business.

2) Choose between becoming an RIA and an independent broker-dealer rep. Becoming an RIA is typically best for those with more experience. As an independent broker-dealer rep you can charge commissions which may be helpful if you are starting with a low asset base. However, if you believe that a fee-only practice is the best way to go, the RIA platform would be a good choice.

3) Select a custodian, create a spreadsheet to project your first few years of income and expenses (i.e., the plan), and follow your plan.

Becoming an independent advisor can be a great career choice. The freedom of operating your own business and the ability of practicing as you deem best has great rewards. You’re also building equity in your business so if you decide to sell it in the future, you will have an additional asset for retirement.

Until next week, thanks for reading!