Wirehouse and other advisors with an itch to open their own independent firm beware: The move can be rewarding — but if (and only if) it’s done correctly, according to several breakaway specialists.
The number of advisor teams seeking independence — or breaking away from traditional firms — is at record levels, says Pablo Bizjack, director of business development for BNY Mellon’s Pershing Advisor Solutions.
Bizjack recently led a webcast on this subject with MarketCounsel founder Brian Hamburger and PFI Advisors CEO Matt Sonnen.
What are the pros and cons of starting a firm in today’s shelter-in-place world?
On the one hand, it’s a perfect time, says Sonnen, because an advisor can start setting up the business from home.
On the other, he warns, advisors need to “look as professional as possible” and have their infrastructure well in place before moving clients.
If an advisor is running a new firm out of the basement, a former employer could “jump on that” as a negative, says Sonnen.
As Hamburger explained: “You can make calls during the day, but you have a duty of loyalty to [the current] employer [and], … you have one shot to get this right. Your employer will look for any weakness.”
Practicalities to Consider
One important issue, says Sonnen, is how advisors can access the products and services advisors have offered clients throughout their career once they go independent.
“I say, ‘Stop!’ Before we go into any of that, you need to go talk to an attorney and look at the specifics of your employment contract and the specifics of your firm,” Sonnen explained.
In addition, be sure to “know the lay of the land on how you can behave over the next couple months, as you’ll be living this dual life of taking care of your clients during the day and building your RIA at night,” he said.
Hamburger agrees, pointing out that it’s no surprise someone “would want to go to the sexy side first and bypass the attorney, but [we] need to make sure they [make the change] safely.”