As the trend toward independence continues, the opportunities raise questions from those advisors who are considering making the move. At Dynasty Financial Partners, we field many queries on topics ranging from real estate to custody to staffing.  Over several articles, I will be addressing the most frequently asked questions.  These responses are meant to provide a helpful walk-through for advisors who are thinking about going independent.

What is critical for me to know about going independent?

There are several main parts to this answer:

First and foremost, you're no longer running a practice but a small business. You don't need approval to make strategic investments in your business, you don't have to worry about who your next manager will be, and you never need to concern yourself with the stifling bureaucracy and politics inherent to larger firms.

But as a small business owner there are expenses to be controlled, staff that require leadership, and marketing and brand-building considerations. These issues can be challenging, but ultimately engender opportunities and pride of ownership. What will prove invaluable is setting up a network of mentorship and support across all aspects of your business from successful advisors and partners who are open to sharing best practices and key insights towards success.

Second, choosing the right support team is critical to the success of a new firm. It is important to understand what roles need to be filled and identify which of your current team members are best equipped to handle those roles in order to effect a successful transition and add value to your new firm. Keep in mind that not everyone on your current team is suited to handle the ups and downs of a start-up; Select those personnel who will think like shareholders, controlling expenses and delivering consistent value to your clients.

Third, know your legal and practical rights regarding your existing clients, and your ability to bring them over. Each major firm has particular policies regarding the issue, so be aware of what you can and can't do in terms of notifying clients and educating them (not selling them) about the benefits of working with an independent advisor. What client information you can take with you is strictly prescribed, and there are regulatory concerns regarding privacy.

Finally, work with the right strategic partners. At Dynasty, we've learned that it takes a significant amount of time working closely with each advisor to determine which resources will best position the new firm for success. Through extensive research, testing and insight we've identified the essential partners that are vital to an independent start-up: An experienced, hands-on transition team, a solid custodian, excellent technology, assistance handling the compliance burden, a leading-edge reporting group and access to an open-architecture platform that offers institutional-quality research and investment products.

Of course, there are numerous other considerations involved (current employment agreements, etc.), but nail these issues mentioned above and the heavy lifting is basically done.

How will my compensation be affected in the independent space in contrast to my current situation?

According to new research by Sanctuary Wealth Services, compensation tends to be higher in the independent advisory arena. One of the reasons that assets at independent RIAs grew 21% over the past three to five years is that clients have realized the advantages of receiving personalized, responsive service versus wirehouse business practices that put their interests second. This continuing loss of faith in Wall Street is good news for those considering independence.

Advisory relationships with their more transparent fee structures are attractive to clients, and because of that successful advisors will convert a significant portion of their existing clients. In their new role, advisors act in a fiduciary capacity on behalf of clients and get paid for advice, not transactions.

As an independent advisor, 100% of your advisory fees hit your business' top line.  On average, firms in the Dynasty network run their practice with a 65% profit margin.  Effectively, 65% of gross advisory fees will translate into your new net pre-tax "payout". As an RIA, you have the potential to ultimately keep more of what you earn, and build equity in your business. (I'd like to take this opportunity to point out that Dynasty Financial Partners doesn't take an equity stake in the RIAs we work with; this is unique in the industry, and has a beneficial effect on compensation.)

Bear in mind, out of that payout your "small business" will be responsible for paying all related fees and expenses, and financial issues in general become magnified. Spend a lot of time now creating a bullet-proof, detailed P&L projecting revenue based on AUM and proposed expenses that includes everything from office space to office supplies, personnel and custodial fees - not to mention taxes. This will give you a holistic, 30,000-foot view comparing your current business versus that of an independent RIA, and let you know whether you can benefits by going independent. Just as important, this exercise will show you where you can identify new sources of revenue and develop strategic business opportunities.

Will I be able to grow my business as an independent advisor?

Like any other business, there are various ways to grow your new firm: Increasing your share of each existing client's wallet; expanding your client base through referrals, word-of-mouth and marketing; and, once your business is established and stabilized, merging with and acquiring "tuck-in" advisor teams (that's a topic for another article).

Client-based growth is nothing new to any advisor - securing more of a client's assets and regularly asking for referrals should be part of running your practice. But how quickly you go from transition to success will have a direct bearing on attracting additional teams later if that's one of your goals, so doing your diligence and planning now is critical. After all, everyone loves a winner.

Are you considering the move to independence? Curious or just have general questions? Let me know at and I'll address those in future articles.


Shirl Penney founded Dynasty Financial Partners and is its president and CEO. He is formerly director of business development for global wealth advisory services at Citi Smith Barney and previously was head of executive financial services and director of private wealth management at Smith Barney.


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