Downside to Independent?

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Jun 26, 2007 11:36 pm

I've been in the business for 4 years with a well known regional and am about to make the leap to private practice along with my assistant/paraplanner. I've been pretty successful in building my business w/ affluent & HNW clients (50 some clients and $23MM AUM) and all my business is fee based. The motivation for my move is that I want to be able to provide more specialized services in the areas of financial & business planning and have more freedom to run my business the way I want to run it not the way my firm thinks it should be run. I'm pretty much a guy who likes to run the show and my vision is to build a boutique wealth management firm.


My fear with the move is that affluent & HNW prospects may not feel as inclined to work with a professional in private practice who does not have the big brand name (ML, SB, UBS, etc...) behind them. I have a solid background along with an MBA & CFP so I have the credentials those type of clients like to see BUT again I'm hoping some of you indys out there can share how your prospecting efforts have been impacted after you left the big firms to go on your own.


Thanks!

Jun 26, 2007 11:42 pm

Solidify those existing relationships and you will be fine. Attracting clients is easier because I don't have to convince anyone I'm not pushing company BS. Though I never did while I was with the mother ship, I learned after I left that my clients weren't completely convinced. They trusted me, but they wondered in the back of their minds how limited in my offerings I was.



Jun 27, 2007 12:13 am

It all goes back to how you present yourself vs. your brand.  If you emphasize and promote the brand rather than yourself, then yes, it will be harder to convince clients to leave the brand that you've spent so much time promoting.  If on the other hand, your clients are sold on YOU and your broker/dealer is just some firm in the background that clears trades and prints statements for you, you should move accounts with a great deal of success.


When I look back at the few accounts that I wanted to move, but didn't, every time my failure related to the fact that the client identified more with the brand than with me as their trusted advisor.

Jun 27, 2007 7:54 am

I'm not concerned w/ existing clients. I'm concerned with future prospects. I don't just want to take what I have and stay at this level. I want to continue to grow after I make the change.

Jun 27, 2007 2:35 pm
indywanab:

I've been in the business for 4 years with a well known regional and am about to make the leap to private practice along with my assistant/paraplanner. I've been pretty successful in building my business w/ affluent & HNW clients (50 some clients and $23MM AUM) and all my business is fee based. The motivation for my move is that I want to be able to provide more specialized services in the areas of financial & business planning and have more freedom to run my business the way I want to run it not the way my firm thinks it should be run. I'm pretty much a guy who likes to run the show and my vision is to build a boutique wealth management firm.


My fear with the move is that affluent & HNW prospects may not feel as inclined to work with a professional in private practice who does not have the big brand name (ML, SB, UBS, etc...) behind them. I have a solid background along with an MBA & CFP so I have the credentials those type of clients like to see BUT again I'm hoping some of you indys out there can share how your prospecting efforts have been impacted after you left the big firms to go on your own.


Thanks!



some of my friends and former coworkers have gone indy. they see to do fine bringing in new clients mostly through referrals.


my only concern/question, is $23mill enough assets to go indy? i know it depends on cost structure and personal assets, but i would think you need at least $50mill to sustain you.

Jun 27, 2007 2:40 pm

For me it was simple!


Mr. Client I now work for you not XYZ financial.    

Jun 27, 2007 3:08 pm
Vin Diesel:
indywanab:

I've been in the business for 4 years with a well known regional and am about to make the leap to private practice along with my assistant/paraplanner. I've been pretty successful in building my business w/ affluent & HNW clients (50 some clients and $23MM AUM) and all my business is fee based. The motivation for my move is that I want to be able to provide more specialized services in the areas of financial & business planning and have more freedom to run my business the way I want to run it not the way my firm thinks it should be run. I'm pretty much a guy who likes to run the show and my vision is to build a boutique wealth management firm.


My fear with the move is that affluent & HNW prospects may not feel as inclined to work with a professional in private practice who does not have the big brand name (ML, SB, UBS, etc...) behind them. I have a solid background along with an MBA & CFP so I have the credentials those type of clients like to see BUT again I'm hoping some of you indys out there can share how your prospecting efforts have been impacted after you left the big firms to go on your own.


Thanks!



some of my friends and former coworkers have gone indy. they see to do fine bringing in new clients mostly through referrals.


my only concern/question, is $23mill enough assets to go indy? i know it depends on cost structure and personal assets, but i would think you need at least $50mill to sustain you.



23 is plenty.

Jun 27, 2007 3:25 pm

4 years in and you're going indy by yourself?


Familiarize yourself with the question "would you like fries with that?"


Forget it, you'll look like a hopper, your existing clients will be picked off by Mr Greybeard in the corner office who has a lifetime of skills up his sleave and will just love the opportunity to speak with your HNWclients.


If you were going along with a greybeard or two then you'ld look like someone making a smart business decision. As a loner you don't.


High net worth people do absolutely want to know what is standing behind you. (I feel a slam on RJ,LPL and the lesser knowns coming on) and don't for a second think they won't. You are going to be spending a lot of time explaining how accounts are protected and what happens to their money if you get hit by a beer truck going home one night (Things that you owe it to your client to consider too by the way).


If you are 4 years into the business and you are then only still in your tender years (less than, say, thirty three) you will be having even a harder time of convincing your clients to follow.


I wish you all the luck in the world, and I don't expect you to thank me for my dour assessment, but I think you need to hear the Devil's side of the argument too and not just listen to the Pollianna Angel on your other shoulder.


I also think that Indy is the business paradigm that makes the most sense in this business. But I think you have two strikes against you and fouls are counted as third strikes in this game. You may get a hit, it might be a home run, you may be put out at first!


Weighing risk reward, you'd be well advised to sit tight and/or come up with a better game plan.

Jun 27, 2007 4:12 pm

23 million now


Take 80% (conservative) = 18,400,000


1% fees on everything = 184k/yr or 15,333/mo gross


at 80% before expenses = 12,266/mo.


Expenses of 5-6k= 6,266/mo net before taxes


All future assets are at 80% net because your expenses are covered. You need to grow the business, and as I said before Indy is as good if not better way to do that (especially by referral).


Those are the numbers. If you have a business maturity, it works, if you have a level of immaturity, then the prior post has a lot of merit.


CIB for everyone!



Jun 27, 2007 4:50 pm

If you have a business maturity, it works, if you have a level of immaturity, then the prior post has a lot of merit.


Well Hoomit, that was a great post with some good points, and CIB nailed it. Break it down, who is greybeard in the corner office? A guy who couldn't or wouldn't take his business to the next level - for his clients and himself. Greybeard is the friend of fear, independence is hope and the future, as far as you and your clients are concerned. How bad could it be - they still have you, and there is a b/d. They want you, or let them have fearful old Mr. G., whom they would deserve if they don't choose you.

Jun 27, 2007 5:25 pm

GolFa, your my new best friend!!  Spiffy has been replaced.

Jun 27, 2007 6:52 pm

"A guy who couldn't or wouldn't take his business to the next level - for his clients and himself. "


Or a guy who has been in his business since Christ was a carpenter and has taken his business to a very satisfactory level indeed before the indy paradigm was even workable thank you very much.


And it doesn't really matter whom Mr. Greybeard or why, the fact is that experience in this business means a lot, and four years is not very experienced.


I'm not saying that the guy is wrong to want to break away from the firm, I'm just saying that he'd better be better prepared! This is not a warm fuzzies business.

Jun 27, 2007 7:07 pm

Or a guy who has been in his business since Christ was a carpenter and has taken his business to a very satisfactory level indeed before the indy paradigm was even workable thank you very much.


That's a good point. I know of several guys in my office doing over $1MM with LOS of over 20 years. Some of them are cool (most are not) and they tell me that they field calls form the competition on a daily basis. They know the huge money is out there, and they like certain aspects of going Indy. But at the end of the day, they are content to run their business, service their existing clientele, pluck off accounts from departed (failed or jumped) FA's, and not deal with the stress of learning a new system...

Jun 27, 2007 9:06 pm

Glad to hear that. I'm not too concerned w/ the economics of launching my practice w/ $23AUM. It's not the AUM that counts but the Production you generate that's more critical in my opinion. My pipeline has $3MM in new assets coming in w/i the next 4 months so I'll be at $25MM and 100% of those assets are fee based.  My average velocity of those assets is running at 1.3% so my production over the next 12 months will be in the $325K range assuming I bring in 0 new clients & experience no market growth. BTW, these are the assets that I would be transferring over (expecting I will leave behind some clients I don't want to bring over). Nothing is guaranteed but I feel confident about these numbers.


[/quote]


some of my friends and former coworkers have gone indy. they see to do fine bringing in new clients mostly through referrals.


my only concern/question, is $23mill enough assets to go indy? i know it depends on cost structure and personal assets, but i would think you need at least $50mill to sustain you.

[/quote]
Jun 27, 2007 9:43 pm

Whomitmayconcern. Thanks for your "devil's advocate" point of view. I actually appreciate it. You brought up some good points/objections and if I can't deal with them or address them then I would be in trouble because I know clients/prospects will be thinking some of the same things even if they don't express it. I'll try to answer/adress your points as best I can for now.


Whomitmayconcer:

4 years in and you're going indy by yourself? Not by myself. I'm bringing my assistant/paraplanner. 2 other more seasoned advisors have asked if they could come w/ me but I have not decided if I want to take time to manage others during my first year just yet. I've also set up strategic partnerships w/ a mid-size CPA firm and a law firm to help me draw on a pool of talent to deal w/ the HNW prospect who may not be comfortable w/ a 2 person practice.


Familiarize yourself with the question "would you like fries with that? Have offers from ML, SB, UBS and Bear Stearns. Came from top tier management consulting firm where I adviced fortune 500 companies in the area of strategy, operations and M&A so if for some reason I failed at this private practice and the wirehouses didn't want me anymore believe me the phrase "would you like fries w/ that?" will never be a part of my profession. Sounds like you have it down though!


Forget it, you'll look like a hopper, your existing clients will be picked off by Mr Greybeard in the corner office who has a lifetime of skills up his sleave and will just love the opportunity to speak with your HNWclients. Not worried about this. Perhaps if I was like most other brokers out there (especially Mr. Greybeard) I would be worried. Before I took on a new client (btw all those AUM were gathered by me not 1 account was handed over to me) I set the stage for a potential move and have confirmation from clients of where their loyalty lies. But it's a good point you bring up.


If you were going along with a greybeard or two then you'ld look like someone making a smart business decision. As a loner you don't. Perhaps it's my leadership style or confidence but actually Mr. Greybeard & others have come to my office to ask what "we" should do. I won't be a 1 man office and since all my business comes through referrals I am not worried about this especially since I plan on hiring additional staff during year 2.


High net worth people do absolutely want to know what is standing behind you. (I feel a slam on RJ,LPL and the lesser knowns coming on) and don't for a second think they won't. You are going to be spending a lot of time explaining how accounts are protected and what happens to their money if you get hit by a beer truck going home one night (Things that you owe it to your client to consider too by the way). Maybe but it will be a lot less explanation than the one I would have to give explaining why the wirehouse I work for has such a bad rap in terms of legal & compliance issues w/ clients. Again since most of my clients come as referrals from their CPA's & attorneys and my practice is primarilly business owners I don't think this will be an issue at all. They are refered to me not my firm. In terms of succession plans if I get hit by a bus their money will continue to be managed by the money managers we hire and my assistant/paraplanner will take care of them like she does now, plus I'll add depth as time goes by. I'll have plenty of insurance to keep the business running while it is sold to a qualified buyer (like any other business that goes through this) if that's the only option.


If you are 4 years into the business and you are then only still in your tender years (less than, say, thirty three) you will be having even a harder time of convincing your clients to follow. Wrong. I did not come into this industry out of college or even grad school. Read my original post and I think you'll understand that age & experience are the least of my worries.


I wish you all the luck in the world, and I don't expect you to thank me for my dour assessment, but I think you need to hear the Devil's side of the argument too and not just listen to the Pollianna Angel on your other shoulder. Actually you were honest and tried to find the chink in the armor and I respect that. So thank you!


I also think that Indy is the business paradigm that makes the most sense in this business. But I think you have two strikes against you and fouls are counted as third strikes in this game. You may get a hit, it might be a home run, you may be put out at first! That's the beauty of it thought! No risk no reward. I've always taken the road less traveled and it has worked out very well for me and my family. I'll wrap this one up w/ the following quote "A brave man dies but once, a coward dies a thousand times." Think about that phrase and you tell me what is a riskier move! 


Weighing risk reward, you'd be well advised to sit tight and/or come up with a better game plan. Opportunity doesn't knock twice!

Jun 28, 2007 11:24 am

"Opportunity doesn't knock twice! "


But it has been known to run down the street screaming if you answer the door without any pants on.


Sounds like you have it set in your sights. I'd advise you to talk to your Wachovia Finet Recruiter and put them on your shortlist of B/D's. They run a good ship that has a very strong name behind them and yours in front of them.


Good selling!

Jun 28, 2007 12:09 pm
Whomitmayconcer:

But it has been known to run down the street screaming if you answer the door without any pants on.





Nice mental picture.  That was truly one of your best, IMHO.

Jun 29, 2007 10:20 am

Wachovia's Finet is not available to current AGE employees due to the merger so they are out for me. I have visits scheduled w/ LPL, Commonwealth & RJFS. I've already met w/ all the wirehouses and heard their presentations and offers and man are those $$$ offers tempting! But in my opinion the $$$ comes w/ a big price (signing their employment agreements).


Whomitmayconcer:

"Opportunity doesn't knock twice! "


But it has been known to run down the street screaming if you answer the door without any pants on.


Sounds like you have it set in your sights. I'd advise you to talk to your Wachovia Finet Recruiter and put them on your shortlist of B/D's. They run a good ship that has a very strong name behind them and yours in front of them.


Good selling!

Jun 29, 2007 10:59 am

That is a shame and it sounds like Wachovia will be losing a good fellow (I'd ask around for an exception if I were you).


This does go to show, however, how disattached the indy platform is from the WS paradigm. WS does not want to become a feeder system into the Finet platform. Truely, the Finet system trades on it's own merits.

Jun 29, 2007 11:22 am
indywanab:

Wachovia's Finet is not available to current AGE employees due to the merger so they are out for me. I have visits scheduled w/ LPL, Commonwealth & RJFS. I've already met w/ all the wirehouses and heard their presentations and offers and man are those $$$ offers tempting! But in my opinion the $$$ comes w/ a big price (signing their employment agreements).


[quote=Whomitmayconcer]


"Opportunity doesn't knock twice! "


But it has been known to run down the street screaming if you answer the door without any pants on.


Sounds like you have it set in your sights. I'd advise you to talk to your Wachovia Finet Recruiter and put them on your shortlist of B/D's. They run a good ship that has a very strong name behind them and yours in front of them.


Good selling!

[/quote]



The front money isn't worth it unless you want to become an indentured servant for 5-7 years.  And then there's the nasty tax hit every year when they 'forgive' a portion of the bonus 'loan'.  No thanks.