Over time, the pain of staying in a wirehouse environment can outweigh apprehension over the work it takes to leave, two veteran advisers told participants in a Financial Planning webinar covering the challenges of going independent.
“We were at a firm where the answer was typically ‘no’” when it came to having “the freedom and flexibility to build our brand,” Winnie Sun said of her 11 years at Morgan Stanley Smith Barney. She and a co-founder left five years ago to launch Sun Group Wealth Partners in Irvine, Calif.
Joining her on the webinar was veteran Paul Rand, who spent 15 years at Morgan Stanley before going independent earlier this year.
Since starting her own firm, Sun has become one of the most successful advisers in the country at leveraging social media, an avenue of promotion she could not have pursued while working for a wirehouse, she says. Her Twitter feed boasts more 80,000 followers – besting even much bigger names like former Federal Reserve Chairman Ben Bernanke, who has roughly 68,000.
Sun Group is affiliated with the independent broker dealer LPL Financial. Rand's new firm, The Rand Group in Newport Beach, Calif., is affiliated with the aggregator HighTower Advisors.
Rand and Sun said advisors should expect the following if they go independent:
1) Gaining greater control
Neither Rand nor Sun could run their practices the way they wanted in a wirehouse environment, both said.
"It's all about control for us," Rand said. "That's absolutely why we left."
While Sun is able to promote her firm using social media channels in a way that was not permitted at Morgan Stanley, Rand says he expects to have more time to spend with clients, now that he's joined HighTower
2) Worrying less about fiduciary conflicts
The Department of Labor's new fiduciary rule served as one catalyst that pushed Rand and his partners to seek independence – not because they expected their fee-based business to become more compliant as an independent firm, but because they expected that compliance problems could prove a distraction for their former employer.
"Just in terms of resources of them having to deal with that," Rand said of compliance. "Now, whether that's accurate or not, I don't know, but that was one of our concerns that helped accelerate our decision to look at something different."
3) More to do
In a poll during the webinar, half of the respondents cited the demands of becoming an entrepreneur as a top concern in contemplating independence. Both Rand and Sun said these concerns were spot on and urged advisers not to go independent unless they were ready for some big changes.
“It’s a ton of work,” Rand said. "I think the most difficult part is having been in that [wirehouse] institution for so long.”
Sun added: “We learned a lot of difficult lessons in the beginning because it was just so different [in terms of] what we could and could not do."
4) Challenges with technology
Both Rand and Sun said they have experienced frustrations with technology in their new independent shops.
"The technology was really good at the wirehouses," Sun said. "I love LPL; they know I love them. But like five years ago, coming to LPL, the technology stunk, OK? And now we make do with what we can. I mean, I think that's the challenge. … They're spending millions of dollars trying to improve it. But from my perspective, it's not great."
Today, Sun incorporates a range of tools from a variety of developers into her practice, including Redtail, Google Docs and Dropbox.
Rand agreed. He found some of HighTower’s technology difficult to use. "We've made the switch to Salesforce, and it's been a little bit of a struggle, but we're getting used to it," he said.
5) Exercising new creativity
Both Rand and Sun say they value having a chance to build the kind of firms they think their clients need and want.
Now that his practice is independent, Rand said he has the chance to build a business model better suited to new investors and is incorporating new “proactive” marketing strategies.
Sun says she is working on instituting changes that allow her firm's clients to interact with her firm when and how they like.
"I have clients now reaching out to me via social media more so than email. It's a substantial difference," she says. "If you think about it, your clients don't always want to call you between your office hours.… If you do it that way, you're going to end up losing a lot of clients, if not today, then the next generation."