Leaving a brokerage firm or a large wirehouse to join a firm of independent planners is a delicate move. Your own career and financial security is at risk when you put your reputation on line with new colleagues. 

It’s a popular move: In the latest survey from Schwab, 86% of brokers surveyed said they liked the idea of independence, with 58% saying they would like to join an existing firm, compared to 34% who would prefer to start their own.

To assess your compatibility with other principals, you need to carefully vet the firm’s culture, investment philosophy, infrastructure, strategy for growth and compliance record, says Andrew J. Sohn, of Antaeus Wealth Advisors, in Boxboro, Massachusetts.

Investment Philosophy. Choose a firm driven by research with screens and investment criteria you like, which leads to portfolios that are more conservative than clients might otherwise choose, he advises. “When times are not good clients generally have far less risk tolerance than they initially thought,” Sohn says.

Infrastructure. Will the staff be able to provide the services you need? Is the back office efficient and prepared to grow? Carri Degenhardt-Burke of Degenhardt Consulting in Jersey City, N.J. says that warehouses are experiencing “a newfound resurgence” because too many brokers find that they don’t get enough support as independents.

At a minimum, clients should have access to all investments you advise for them. The brokerage firm and custodian your colleagues choose “may not be the most lucrative, but their integrity must be a fit,” says Sohn. 

Name. If the firm name lists the founding individuals, clients may identify with those individuals rather than with you. The risk is that you will lose clients when principals leave or retire.

Strategy for Growth.  You want a company with a marketing and public relations strategy that will help you attract new clients. Your future is based on your reputation, which leads to referrals and revenue.

Culture. A good firm will have almost no turnover among both staff and clients.  You should also consider your attitude to philanthropy and community involvement? At some firms, employees are encouraged to take a day off per month for volunteer work. Other firms donate a percentage of revenue each year. Look for a spotless compliance record. “One advisor's trouble could impact every other advisor in the firm.   The mandate needs to come from the top in the firm that all rules and regulations will be followed,” says Sohn. In a good firm, the compliance department has the power to intervene whenever necessary.

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