Many financial advisors think about leaving the ‘safety’ of the Mothership - you know, the large firm that takes 60% or so of every nickel earned - but then when push comes to shove, can it be done?
Resoundingly the answer is “yes”. Advisor headcount continues to decline in the wirehouses, and rise at independents – the billions of dollars of asset flow out of major brokerage house and bank brokerages shows that both Advisors and Clients are voting with their feet. You CAN do it – but you’ve some thinking, planning and mental reorientation to work through if you hope to be successful. Here are some steps to take and questions to ask:
First of all, review your needs – how are you doing business now? Are you fee based only? If so, a pure RIA will work well. Do you have any commission business? If so you’ll want to look at a hybrid, where you can execute both commission trades and fee based. Who is your custodian? In the age of Ponzi schemes clients are wary of where their money sits. Where will your office be, what sort of set up do you need, what is your brand, who is your target market? Whose CRM system will you use, what are the technology needs, what about legal and compliance? You’ll need to think about health care benefits, insurance needs for the business too. There is much to do.
If you are working full time it surely is very difficult to think of a new career opportunity too – so it may be easier and better that you team up with someone else, someone who has already has a venture underway – very few people have the energy to give everything they have to their client base in the day while working on Financial Freedom for themselves in the evening.
Think about how much of your book will transition? Are you planning on 70%? How long will that take? What if only 20-30% make the move? If you are on your own you need to be prepared for this scenario. How hard are you willing to work to rebuild your business – you know, the one that you own.
Secondly it will take twice as long to get everything set up than stated by any of the custodian firms, no matter how helpful they are – and remember this will also be in the time when you’re trying to figure it out for yourself, so half of what you hear doesn’t make too much sense anyway.
Thirdly, it costs twice as much as advertised to get going. Still up for it? No one said it would be easy.
Taking the Leap
But you are going. You’re an entrepreneur, you’re sick of the industry turmoil and you’re determined to be a success in your own right. . . So here are some things to think about early on……….If you are with one of the major firms that has signed the Broker Protocol (note to yourself – find out if yours has) there are certain rules by which you must abide, or risk being sued by the firm you’re leaving. By the way, if you owe the firm money you will have to repay it – whether it was a bonus loan to join the firm, or a retention bonus to stay there. You might be wonderful, but that’s not why they gave you the money, they may even have been horrible and not done all the things promised, but you still owe the money. Pay up, make an arrangement, and get on with your life.
There are many opportunities to join up with like minded people, whether in a small firm or one of the larger roll ups, look for one with the right culture fit for you, and culture fit does not mean payout. A higher payout may mean the firm’s offerings are slimmer or limited; do the new firm’s offerings match your book of business? It’s true you won’t have sales quotas but what are you going to? What does your firm pay for, and what will you have to cover (100% if you’re going for true independence) – is there transition help for the move – are there any up front dollars – who covers the fees your client may have to pay in leaving your old firm?
And what about payout? Get real – it’s expensive to run a business and someone has to pay for it, so you’re not going to end up with 100% of your commission dollars in your pocket, while being housed in the Taj Mahal of your city’s office buildings, and with the latest in technology at your fingertips.
When you decide what is right for you you’ll have the time of your life! All these years you’ve been working to help your clients achieve their goals and dreams and now it is time for you to untether that mooring and sail away for a life of hard work, fun, and pleasure in what you can accomplish – all the reasons you got in to this great business in the first place.
Mag Black-Scott is the President and CEO of Beverly Hills Wealth Management, a registered investment advisory firm located in Beverly Hills, CA. More at
