On First Thought

Many factors at Play, Know all Sides of the Story You’re Being Told

The latest reports from key industry researchers estimates that the trend of “breakaway brokers” seeking independence will continue and seems real. Last year (2010), according to Cerulli Associates, independent advisors represented 41 percent of the industry's headcount, up from 37 percent in 2004. Assets managed by independent brokers and advisers grew to nearly 35 percent from 30 percent in just four years.

So if you’re a wirehouse advisor contemplating the path to independence, where do you start? Today’s constant market volatility and client hand-holding doesn’t leave much room for due diligence on the various options in the marketplace. Then there’s the meet and greet with a prospective broker/dealers’ recruitment team – surely you’ll hear all about the great things available to you, but likely nothing relative to their weaknesses.

Before even getting into reviewing a single firm, you need to address the question of “What does Independence mean to me?” Key factors such as ownership (do you want to own the business or be part of an existing team?), control (allocation of capital, resources, products and services levels) and lifestyle (more time with family? Community involvement?) are drivers to your decision. At FirstPoint Partners, our "Spectrum of Independence" helps an advisor determine what platform works best for them.

Determine the right platform for you – B/D, RIA (Custodial) or Hybrid - Customized vs. Turn-key? A customized business will have your own branding, client statements, service levels unique to your organization and likely a higher payout. You’ll also have access to an open architecture of products for your clients but take on the compliance responsibility for your business.

Turn-key = less control with less responsibility. So, office management will be handled which means you’ll likely be in business quicker. The focus will be more on clients and managing your business and not on managing compliance (which will be outsourced). Costs can be shared but they come with less customization on branding (you’ll align with an existing group’s brand).

By working with FirstPoint Partners we can help streamline your decision-making process – we help you:

• Know the options
• Know the facts
• Know the questions to ask
• Know your strengths

Our consultative process includes a profitability analysis – side-by-side analysis of options being considered, prioritizing business needs, identifying custodians/broker/dealers that fit, introducing advisors to broker/dealers/custodians, coordinating home office visits, negotiating transition assistance, and offering legal/public relations/marketing assistance as part of transition. Having this full snapshot in hand, then an advisor is ready for firm introductions/visits and we’re there with you coaching the move to completion.

So what does independence mean to you? The costs savings of your decision can make it become a $1 million decision (based on a 500k producer paying 20% annually to a BD for services, over a 10 year period). Make sure you get the whole story when determining all the factors about going independent.