You've Decided to Go Independent. Now What?

A trend in the wealth management industry that cannot be ignored is the growing number of advisors who are leaving wirehouses, independent broker-dealers and larger RIA firms to embrace independence. The desire to ‘go indie’ often is motivated by an advisor’s economic situation or the desire for autonomy.

There are also some less obvious reasons why it can be a great idea for an advisor to own their practice, such as improving client relationships.

It’s important to note, however, that there are several models of independence, with various features that may or may not be right for an advisor.

Once an advisor is committed to going independent, they should identify which model of independence is right for their practice by examining their current practice and understanding the pros and cons of each model. This process will help them make clear decisions about the framework of their new firm and will maximize the empowerment they find through independence.

Examination of Current Practice

As advisors evaluate where their practice currently stands and compare it to the kind of advisory firm they hope to create, they should identify a solid vision for their firm. From there, they can pinpoint the help that they may need as they move towards independence.

The resources that an advisor needs will define the model of independence that makes sense for them. Advisors should choose the appropriate model based upon their own strengths and shortcomings.

In addition, several vital areas of a practice can help determine the model that makes the most sense:

• Succession Planning – Advisors should consider the longevity of their business and what plan they have in place to exit. Making the move to independence can help advisors fill potential gaps in that plan, as some RIA platforms will offer a succession planning solution as part of their longer-term solution.
• Compliance – Being at the very heart of any advisory firm, it’s important to recognize which path to independence is going to be best for maintaining a firm’s compliance needs. Compliance is an area that most advisors spend little if any time in before establishing and independent practice.
• Tech Stack – Technology has become an essential part of financial planning, therefore it’s important for advisors to choose a model that enables them to build out a tech stack that optimizes operations and experiences in their practice.

Finally, advisors should consider how a move will impact clients. As a fiduciary, advisors have a responsibility to make sure that any drastic changes to their practice will benefit their clients.

It’s important to keep this in mind when evaluating models and figure out what move benefits both parties.

A Multitude of Options

Advisors who are interested in setting out on their own should investigate the options and determine the fit that best suits them. Ultimately, the goal should be to create a practice that provides the following:

• The autonomy and degree of control that the advisor seeks.
• The support and infrastructure that the advisor needs.
• The ability to transform and deepen client relationships.
• The time and support needed to facilitate growth.
• The ability to create true enterprise value in a practice that the advisor owns.

Perhaps that means establishing your own RIA firm and taking on the full gamut of responsibilities that entails.

For some, running a business comes naturally, and this level of control and independence may be appropriate. At the other end of the spectrum, joining a larger RIA or a national IBD may provide enough autonomy and the support needed to allow a level of independence that works.

In between those two solutions, platforms for supported independence have emerged that provide true ownership and allow for the creation of enterprise value, but offer services such as compliance, billing, investment management and other ‘non-revenue generating’ activities that would otherwise hinder an advisor’s ability to grow their practice.

Regardless of what model an advisor chooses, it is essential that the firm they create or choose to work with aligns with the strengths and weaknesses that the advisor brings.

Once advisors do the hard work of analyzing the options, a vision for the future can be put in place.

Matt Regan is president of Wealthcare Capital Management, a fee-only and a hybrid SEC-registered investment advisor that also provides an investing platform featuring investment management and oversight.