Many advisors who moved from one major firm to another during the financial crisis now believe that their future is in the independent space, yet are uncertain as to the ideal timing to make this shift.
Over the past 7 years, the importance of control, service, flexibility and autonomy have become top of mind for advisors. They recognize that the ability to control how they run their business and service their clients, along with flexibility and autonomy, are more attainable in the independent space. While quality advisors more typically possess a fiduciary mindset (regardless of actual regulatory standards), they see an enormous value to clients in being able to access the best of the industry’s resources (like shopping the street for the best loan terms or credit cards) and not being limited to their firm’s selection of offerings.
Now that many contracts are nearing completion, those advisors may feel that they’re not quite ready to make the jump to independence and are considering an interim move to another wirehouse or a regional firm. Our advice to these advisors is very straightforward:
- The only reason to move again as an employee – in advance of the ultimate move to independence – is if you need time to prepare your business for such a change and this cannot be accomplished where you are.
- An interim move for the sole reason of monetizing the business once again is often ill advised.
- A move NOT made for the benefit of clients will be recognized as such by them and ultimately mean a loss of trust.
Given these points, an advisor should consider the following:
“If the business is not yet ready for independence, then why not stay where I am until it is?”
Staying put is typically the easiest path, except in those cases where an advisor no longer believes that he can continue to grow the business or service clients as he feels he should without making some real change. Some teams need to add partners, build out staff and develop additional expertise before they are truly ready to be independent. Some advisors want to perfect their wealth management, investment management or client service models before they become business owners, and they have serious doubts whether all of this can be achieved at their current firm.
A move to another wirehouse gives a team the additional time to perform the necessary due diligence on the variety of independent options that exist. There can be a benefit to “putting your house in order” to ensure a smoother and more successful transition to independence, all while being fully supported by a major firm’s management and operational team. In essence, it serves as an “incubator period”, allowing the advisor to get the business “ready for prime time.” While it may not be perfect, it may be smarter for some to stick it out until the timing is better to make the transition to independence so that partners, team members and most importantly, clients are not subjected to a move that from the outset is, at best, a temporary measure.
“Can a move help me to monetize the business, and at what cost?”
Fortunately, there are many other ways to gain access to capital without putting clients through an additional transition. Third-party lending institutions, such Live Oak Bank, offer debt solutions to breakaway advisors. And for those who are comfortable selling some equity, there is no shortage of investors in this space, including Focus Financial Partners, who can provide capital for startup as well as for future needs such as acquisitions.
For others, moving to another wirehouse, even when the expectation is that it may not be the final stop, could be exactly what clients need in order to be better served and for their advisors to take the business to the next level. The opportunity this creates to recapitalize the business through another deal is just a fortunate byproduct.
That being said, a move that solves for both sides of the table – providing you with the time and money you need to prepare for an independent practice as well as a better experience for your clients – is certainly worth considering, provided you are ready to take two steps instead of one.