Weighing the decision to go independent can be trying and time-consuming. When advisors like you contemplate making a move toward greater autonomy, they often ask three main questions of their potential partners to identify the best path toward independence.
1. What kind of technology does a partner offer?
Working for a large wire house or regional firm, you grow accustom to having the latest technology at your fingertips. When going independent, many advisors do not realize the number of systems required to operate a firm capable of effectively managing assets with proper oversight for regulations and compliance. Custodial firms, like Fidelity and Pershing, offer several technology options through full-service platforms or partnerships, and what they might lack in one arena, they make up for elsewhere, allowing advisors to better serve their clients’ diverse needs. As you seek a new partner, consider the breadth and depth of what they can provide you technologically, as it will have an impact on your ability to serve your clients.
2. What can a partner do for my brand?
Advisors seeking independence often have two competing fears. First, how can a partner help grow preference for my small brand? Second, how can I ensure a partner will leave my brand alone? Becoming an independent advisory firm means that you’ll be building a new brand to compete with others in the field—both big and small. The best potential partners will commit to helping you grow your brand image without asking you to sacrifice the brand you’ve already created.
3. What do the partner’s financial terms look like?
Do your math—always know the cost of doing business, especially as you select a platform. The RIAs you speak with should be totally transparent about all fees, but here are some things to consider when discussing the financial terms of your relationship.
- Will the RIA mandate an equity stake in your company by offering to provide office space? This can be an example of a hidden profit center and a long-term offering to trap your book of business in that company if you don’t read your contract correctly.
- What other charges exist just under the covers and may not come up during typical conversations? For example, does the partner offer tiered fee plans based on AUM increases over time? As you grow your book of business, you may become less reliant on a partner for specific services. To ensure you can grow without incurring increasing overhead costs, ask your partner how costs will adjust over time.
- Is the partner and the platform inclusive—does it meet the full scope of your needs? Make sure you’re choosing a partner to help you with the things you need. Every potential partner is different and has different strengths. Be sure you choose a partner who meets your need and compliments your strengths by making up for your potential weak spots.
- Is the RIA you are partnering with owned and operated by a private equity group? Private equity groups have an incentive to sell, sell, sell. This means a private equity group may be looking out for their needs first, not yours. A privately-owned RIA platform has very little incentive to sell, and is more likely to give you and your firm the white-glove treatment it deserves.
As an independent advisor, your goal is to own your own business, and you need to know what your take home pay will be after partnering with someone to help you grow that business
At Advisory Services Network, we have conversations every day with our existing independent advisor partners and new prospective partners seeking independence from wire house firms. ASN understands the details you need to have as you make your decision to go independent, as well as why you need transparent information to feel comfortable about the decision. If you’re not getting answers to any of the questions I’ve listed here, call me today so we can get you on the path to independence faster.