An interesting statistic emerged recently from Cerulli Associates that states independent advisors will control more assets than wirehouse firms by 2020. This information comes as no surprise to our team here at Elite Consulting Partners, as every day we see more and more advisors making the move to independence. However, it is in going beyond this statistic, understanding the advisor mindset, and the trending desire for independence that shows where the true story lies in what is driving the financial services industry today.
Large firms have made a decided shift in recent years away from a business structure focused on supporting their team of advisors. Instead these firms have aligned themselves with a philosophy based on churning revenues with little focus on how those revenues can best be achieved. This alienating of advisors at the outset created a subtle mindset shift which now has become a loud rallying cry within the financial services industry. Advisors are pushing back and have come to question whether their firm is providing the necessary resources needed to achieve their own personal success.
Key operational issues such as management support, technology, ease of compliance, client acquisition strategies, and customer service, monetization, and control are just some of the many notable reasons advisors are making the decision to leave large firm stability and become independent. Put simply, independence offers options and puts the advisor is in the driver seat to make the key decisions for themselves.
For example, an independent advisor can choose which companies to align themselves with, as well as what portfolio of products and services they wish to offer. An independent advisor sets the strategic tone for their office, both in terms of theory and practice, driving a business culture forward that attracts and retains their most desired clientele. Also, this strategic control offers gives the advisor the ability to maintain the oversight over their brand and image; thereby avoiding the seemingly daily negative headline risk posed at the wirehouses. An independent advisor can also select supportive technology platforms that align best with their business processes and streamline day-to-day activities to achieve optimal results for both the client and themselves. Additionally, going RIA has an end game upside in so much as an advisor can sell their practice for much larger multiples in an open market versus within a larger firm’s complex or region.
It is no wonder that an advisor, who by nature is both results-driven and entrepreneurial at heart, would be attracted to the flexibility and growth potential offered by independence. Though, it is important to note that while the trend to independence has already firmly taken root with the advisors themselves, large firms have failed to make the adjustments to retain their talent and set up necessary protections from the seismic shift headed their way as more and more advisors choose to leave and open-up shop for themselves.
The siren song of independence is calling advisors in financial services today, though it is the large firms – not the advisors – headed for the cliffs if they don’t heed the message.
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