Change is always scary – at least at first. For financial advisors, leaving the safety of the large firms housed in the towering skyscrapers of Wall Street and starting their own consultancy may sound like an overly ambitious and herculean thing to think about. However, many have done it before and there’s no reason for you to not accomplish the same feat. While it’s not a walk in the park, it’s feasible and can be highly rewarding.
The success stories involving breakaway brokers are varied and there’s not one single formula for success. However, financial services recruiters would agree that there are certain tried-and-tested tips, a blueprint or roadmap that brokers can use as a guide en route to independence.
Never Doubt Your Reason for Leaving Your Current Firm
One of the things you need to do is to pinpoint your reason why you want to leave your present wirehouse or brokerage and establish your own advisory practice. The key is to never second guess the reason behind your decision. Many times, consultants decide to leave the nest of their advisory firms and when things go awry, they feel devastated and regret their decision altogether. If and when you decide to be an independent advisor, be 100% resolved on your choice and never question your reason for leaving.
According to the findings of the research group Aite, the most successful independent consultants left their work because of discontent. More than half said they “broke away” because they want to have the control to choose the crème de la crème third party products and 42% said they want more freedom on how to advise their clients. You can tap the expertise of financial advisor recruiters to help you with money matters with your transition from an in-house consultant to running your own practice.
According to surveys, the startup cost for an independent brokerage practice is somewhere between $50,000 and $100,000. The final amount will depend on a number of things such as office space, technology and infrastructure, staffing and branding materials. However, you should not see this as an irrecoverable expense, but rather a capital expenditure.
You should also consider how much revenue you’re going to bring in – short-term, mid-term and long-term. According to the Aite Group research mentioned in the previous section, most breakaway brokers retain more than 75% of their clients. This is your short-term income. You also have to decide on a business model – usually a choice between fee-based or commission-based. The good thing is, you don’t necessarily have to choose one over the other. A number of independent advisors employ a hybrid business model wherein they dually perform the roles of a standalone consultant earning a retainer fee and as a representative of an independent brokerage firm earning a commission.
Lastly, being an independent financial advisor has its implication on your lifestyle. Actually, it’s more on your personal business ethic. As an independent financial consultant, the way you run your practice is 100% up to you. This involves constantly updating your business practices based on new regulations and policies. Likewise, adhering to impartial fiduciary standards is a non-negotiable.