Waltham, Mass.–based independent broker/dealer Commonwealth Financial Network has introduced a new offering to help lure breakaway brokers out of the wirehouses. Business Consulting Services, as the firm calls it, will be a suite of offerings to provide a so-called “soft landing” for employee advisors as they transition into owning and running a business as an independent.
“Going from a wirehouse to independent and having those entrepreneurial responsibilities is a headache and a big learning curve for them,” said Jonathan Henschen, president of the recruiting firm Henschen & Associates in Marine on St. Croix, Minn. “So anything broker/dealers can do to diminish those insecurities and diminish the learning curve—it only makes sense.”
While the firm has had a practice management function for many years, which does a lot of what’s required to transition to independence, this is a formal packaging, with dedicated resources for breakaway advisors, said Matt Chisholm, senior vice president, RIA services and practice management, at Commonwealth. Most of the functions are done in-house, but the firm has also relied on third parties to help bring these services to their advisors.
The firm has a dedicated team of six consultants that will engage with the advisor team early in the recruiting process and throughout the transition, and serve as an ongoing resource for these firms.
“This is the team that’s going to help bring to bear some of these decisions at the right time through the transition,” Chisholm said.
Incoming advisors can choose what services they want á la carte across nine primary functions, Chisholm said. These advisors will get a payout that will likely range somewhere between what a traditional wirehouse advisor and traditional independent advisor would make, with additional fees for certain services.
The first area in which Commonwealth will provide support is in investments via a new outsourced CIO (OCIO) offering called Advantage. Advisors will still be able to run their portfolios and have discretion, while the firm will trade and manage their models for them.
In regard to operations, the firm has performed a pilot with existing advisors for a newly created virtual assistant offering. This is a dedicated individual, a Commonwealth employee, who is assigned to firms and will provide sales assistant support, delivered virtually.
The firm also provides project management support for larger, nonoperational projects a firm might undertake, such as a vendor selection or organizational restructuring.
Technology is the next function that the b/d will help with via its fully integrated platform Advisor360. The firm will also provide consulting to help set up offices, connect to networks and put cybersecurity in place.
The firm will also help with marketing, via a quickstart guide as well as its Brand Studio, a newly formed capability that helps advisors establish a name, logo and website—all the fundamentals to get marketing off the ground.
Advisors can also receive consulting around risk and compliance, such as what insurance they need to buy, including property insurance. The firm will also help with its own due diligence around data, privacy and continuity. And for firms that want to start their own RIA, the firm’s RIA consulting group can help with the legal filings, reviews and examinations.
The next function where advisors can seek support is in human resources. The firm will help teams with how to set up their legal entity and how their staff gets compensated. They’ll help with recruiting other producers, Certified Financial Planners or support staff, as well as hiring and onboarding consulting.
An outsourced CFO offering to support breakaways with finance functions, including financial statements, general ledger, cash flow analysis, bill pay services, payroll management, tax filings and support is also available.
Among its suite of services, Commonwealth will also cover assisting advisors with real estate. To do so the firm has partnered with a couple of large real estate providers. In total, the offering means advisors can get assistance sourcing real estate, negotiating leases, as well as help with space design and furniture consultations.
A newer capability for Commonwealth is a formalized succession planning and M&A capability. While the firm provides this type of support currently, it is in a more reactive, ad hoc way, Chisholm said.
“The amount of demand for breakaway traffic, the amount of capital out there in the RIA space, courting opportunities, fear of missing out, market high—all those things are really creating a frenzy,” he said. “We’re seeing it within our base to such a degree that we’re going to much more formally invest further into a capability we’ve always had.”
The firm will do internal valuations, and it can provide templates for deal structures. The offering will also include a more stated packaging of financing options, whether that be lending capital, growth capital or some combination of the two.
“And although it’s not a transitional service, it’s certainly something that has to factor into the minds of the breakaways,” Chisholm added.
Commonwealth joins other firms that have rolled out similar offerings for breakaways. Last April, LPL Financial introduced its premium affiliation model, Strategic Wealth Services, aimed at helping regional and wirehouse advisors with some of the more entrepreneurial tasks involved in going independent. Kestra launched its Private Wealth Services several years ago, a division of the independent broker/dealer that helps wirehouse advisors go independent, providing office logistics assistance, consultative compliance support, a comprehensive platform, a transition plan and daily management support.
In early 2019, Private Advisor Group, a hybrid registered investment advisory and office of supervisory jurisdiction of LPL Financial, introduced an affiliation model aimed at luring advisors out of the wirehouses and making it easier for them to move to true independence, with an assist along the way powered by PAG.
More recently, Integrated Advisors Network, a Palos Verdes, Calif.–based support platform for RIAs, acquired ReDefine Independent Advisors, an RIA consulting firm, to build out a dedicated offering for breakaway advisors.
“I think our channel could attract more wirehouse reps if we help them more with these type of models,” Henschen said.