Why now may be the time to go independent

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The financial uncertainty that has put some advisors into a career holding pattern is pushing others toward striking out on their own, according to two recruiters.

“I’d say independence is resonating with advisors now more than ever,” says Jodie Papike, president of Cross-Search.

Overnight virtualization of the industry has made advisors and their clients more comfortable with technology. It’s also demonstrated to once-skeptical and hidebound advisors accustomed to working under a large brand just how effectively they can operate solo.

“I think, if anything, it’s been just further proof to many people that they want to be in the independent space,” says Louis Diamond, executive vice president of Diamond Consultants.

Especially, Diamond says, given large brokerages’ rules that require their advisors to stay on a particular message. As a result, many planners have been constrained from speaking to clients or taking to social media to voice their opinions about the transformation being wrought by the coronavirus pandemic and the global economic shutdown.

“A lot of advisors realize that, from a marketing standpoint, they were super limited during the onset of this crisis,” Diamond says, adding this makes it difficult to calm or reason with worried clients. “They [advisors] felt they were kind of fighting with their hands behind their back.”

Jodie Papike is the president of recruiting firm Cross-Search.

The rush to go independent isn’t without its risks, or its detractors. With their own incomes uncertain and their clients skittish, some advisors have decided to wait until next year before making any big career moves, recruiters say.

By contrast, those who’ve been on the fence are realizing they don’t need to share an office with dozens or hundreds of other advisors, Diamond says, especially given the amount of their revenue they relinquish for the privilege.

“For 50 cents on the dollar, they don’t need a lot of the resources that their firms give them,” he says. “They actually like the flexibility of doing their own thing.”

Advisors are discovering their clients are more loyal to them personally than to their firms, Papike says.

Papike and Diamond’s firms both began the year with strong interest from advisors seeking to make moves, the recruiters say. But in February, when the stock markets recorded their worst drop since the 2008-2009 financial crisis, planners largely stopped calling.

“What advisors needed to be doing was taking care of their clients,” Papike says. “Since things have stabilized and advisors are not having to deal with the market volatility every day, activity has picked up.”

Papike says her firm’s business dropped by about 50% in March, but rebounded to the previous year’s level by mid-April.

Some advisors also have begun to question the invincibility of the large firms they’ve chosen to work for, the recruiters say.

“When we see down markets and interest rates that are going lower, that means that broker-dealers are less profitable than they were expecting to be in 2020,” Papike says.

She expects some BDs will reduce expenses. Some may seek to buy competitors or even put themselves up for sale.

“With any kind of change like that,” she says, “advisors start evaluating, ‘What kind of firm am I with and am I comfortable in this kind of environment?’ ”

When their discomfort rises, so will their willingness to move, she’s found.

“They say, ‘It may be uncertain times, but I have enough pain that I’m going to make this transition happen.’ ”

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Going independent Coronavirus Recruiting Louis Diamond Practice management RIAs Independent BDs