Only the Strong Survive

Those of us who can still remember what it's like to be a teenager know the feeling well: I've got to get out of this house. These rules are driving me nuts. I'm an adult now. I need my independence. The drive to be out on your own, to slip free of another's control, is a primal and positive one. But every teenager finds out soon enough that the satisfaction derived from going independent is quickly

Those of us who can still remember what it's like to be a teenager know the feeling well: “I've got to get out of this house. These rules are driving me nuts. I'm an adult now. I need my independence.”

The drive to be out on your own, to slip free of another's control, is a primal and positive one. But every teenager finds out soon enough that the satisfaction derived from going independent is quickly offset by other forces — the worries that accompany rent and bills, the fears of facing the realities of the working world, the disgust you feel at having to eat the lousy food you've cooked for yourself.

*****

Independence does not come cheap: It's a dominant theme in this special broker/dealer supplement. In fact, the tone of this collection of articles is overwhelmingly cautionary — so much so that it might cause some of you thinking about independence to think again.

Good.

There are many good reasons for jumping from a wirehouse to independence — potentially higher payouts, the ability to run your practice as you see fit. But none of them comes without a serious amount of contemplation and preparation. For this reason, thinking twice is probably a good idea.

The overview piece, which starts on page S8, highlights eight potential obstacles to a smooth transition to independence. They run the gamut, from a lawsuit from a former firm to the difficulties in operating a small business (which is, after all, what an independent practice is).

The article on page S22 is a guide to sorting through the payout issues facing independent advisors. Its advice might best be summarized as, “If the payout sounds too good to be true, it probably is.”

The supplement concludes with a Q&A with Donald B. Trone, founder of the Foundation for Fiduciary Studies. Trone describes the fiduciary responsibility facing advisors, and he outlines ways an independent advisor can protect himself from accusations of a breach of those duties.

But lest all these warnings and instructions convince you otherwise, remember that going independent can be a terrifically rewarding experience, given the right reasons for going indie and the right preparation.

Going independent isn't for everyone; some advisors excel under the rubric of the wirehouse, with its tried-and-true strategies. But for those who see themselves as entrepreneurs, they are candidates for the transition. “It takes a lot of guts and a lot of planning,” says Matt Delaney, who left Merrill Lynch six years ago to launch the Wharton Business Group. Done right, “It gives you great freedom to pursue the well-being of the client.”
David A. Geracioti
Editor

TAGS: Archive
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish