There are many reasons an independent RIA who also holds a license with a broker-dealer might want to change broker-dealers. Maybe something in the culture of the firm has changed. Maybe there was an acquisition and the firm you joined for its small, family-owned environment is now owned by a much bigger firm with owners you’ve never met. Whatever the reasoning, there are certain questions RIAs should ask before making a transition.  Pat McEvoy, President of Woodbury Financial Services, spoke with Financial Planning about his thoughts on what these questions should be:

Q: What questions should RIAs ask before changing broker-dealers?

A: A major issue is not just where you’re going but why you’re leaving. The same things that are making you want to leave are the things you need to look into, so you don’t end up in a similar situation and feel the need to leave again. So the first question you might want to ask yourself is: What are the major issues within your practice causing you to find that the current broker-dealer is not a good fit? There are usually one or two reasons advisors decide to leave a firm — the first might be that the firm no longer lines up with your business, and the second would be the culture. Once you’ve answered that question, then it’s time to decide if you want to make a move to an independent firm, or to a wirehouse or a bank.

Then, the second area to look into at a new firm you’re considering switching to would be what the ownership structure of that firm is. Is it owned by private equity, publicly traded or owned by a parent company, for example? How does that ownership structure fit in with your vision of where you’d like to be?


Third, advisors should ask themselves what they feel they need to be better at. What’s missing, or what’s the flat spot in your practice? Maybe you want to expand into estate or tax planning, or have better technology? See if the new firm is a good fit, given what you’re trying to build into your own practice.

Fourth, consider charges, expenses and long-term financial health of the firm you’re thinking of switching to. Find out how the firm makes money. Many firms have considerable fees that are applied across the board. Look at the non-revenue income of a firm to determine if those expenses are fair and reasonable. Determine if the firm is making a profit on your practice in ways that don’t support your business model. What is the long-term sustainability of the firm? What if there are lawsuits? The answers to those types of questions will give an advisor a perspective about the type of firm they’re joining.

Fifth, find out what kind of communication strategy the firm has developed. It’s important to make sure the firm does have a strategy around that. At Woodbury, we are very persistent in helping our reps and advisors be good at communication, setting up automated ways for them to notify clients if something unexpected comes up like a natural disaster, or if they become injured we have systems for notifying clients as well. It’s hugely important to find a firm that will support you in keeping in touch with all your clients.

Last but by no stretch least is the compliance and tools offered by the BD’s investment advisory platform. The many reasons to develop an independent investment advisory practice have changed. Less compliance, fewer regulations and higher profit margins are no longer automatic. Many BD’s have opened up their resources and platforms to accommodate a wide range of practices. But independent RIA firms are feeling the pressure to comply more and more and see advantages in affiliating with BD’s who can offer the same support at less cost by taking advantage of scale.

Danielle Reed writes for Financial Planning.



Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access