New Decade, New Business Model?
Is 2020 the year for you to become an independent advisor? There are a number of benefits for both advisors and their clients to go independent. For advisors, it enables more flexibility over how to serve clients, access to an open architecture and greater ability to grow their business. For advisors who have moved to the RIA model, 76% report an improved lifestyle and 64% report an increase in net income.* From the perspective of investors, they can work with an advisor who is required to put their clients’ interests first.
Over the past few years, more and more advisors are moving to an RIA model and advisory firms are consolidating to expand and/or deepen their service capabilities. Consolidation doesn’t necessarily mean you have to become a full-fledged employee of another firm. Instead, becoming an affiliate of a firm may allow you to keep your book of business and your autonomy, while gaining added benefits such as brand recognition and infrastructure.
There are 3 overarching questions to ask yourself to determine if now is the time to become independent:
Are you interested in leveraging an established brand?
When an advisor associates with an existing firm, it can lead to increased business opportunities and asset growth through tapping into an established brand and pre-existing marketing campaigns and events. One of the biggest concerns related to going independent is the fear that your clients will not move with you. Business has always been and will continue to be all about relationships, so this should not be a major concern, and becoming affiliated with an established brand can help assure those relationships continue.
Do you want to control your day-to-day tasks and also have support as needed?
As an affiliate of an independent firm, you control your schedule and work-life balance. At the same time, you are able to tap into the firm’s back-office operations, such as compliance and technology. In some cases, you may also be able to share support staff. In a 2018 Schwab study of advisors considering independence, 9 out of 10 advisors said they preferred at least moderate support with branding, operations, and staffing.**
Do you think you can find a firm that’s a good match for you?
It’s important to select a firm that is a good cultural fit and is aligned with your investment and client service philosophy. The better the match, the smoother the transition for you and your clients. So, just like you do due diligence on selecting investments for your clients, conduct a thorough due diligence process with potential firms. Make sure the firm you select has the same ethical standards and high intellect that will match and push you to continue to grow and challenge you to better serve your clients.
Advisors can create the client experience they envision and pursue successful professional careers. This makes the future bright for advisors and their clients. Cerulli Associates projects that the independent RIA and hybrid RIA channels will grow in asset share from 22.7% in 2016 to 25% in 2021.***
Are you ready to step out on your own and enjoy the freedom and control of being independent, while at the same time benefiting from support? If so, consider Toroso Advisors.
Jim Hofheimer is Executive Vice President, Toroso Advisors.
* Source: “The Truth about transition: The grass is often greener” Investment News, October 14, 2016.
** Source: Spectrum of Advisor Independence Custom Study, conducted for Schwab Advisor Services by Phoenix Marketing International, June 2018.
*** Source: The Cerulli Report: U.S. Advisor Metrics 2017, Exhibit 2.14.
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