Leaving behind the comfort and familiarity of a traditional brokerage to build your own firm takes both courage and entrepreneurial spirit. Yet many successful breakaways have shared that it’s far less about some deep-rooted desire to build their own firm than most advisors might imagine.
The reality is that many independent firm owners made the leap to independence to fulfill a commitment to better serve their clients—something they felt they could no longer do within the captive environment due to increasing limitations and bureaucracy.
One former wirehouse advisor told me that she and her team did all that they could to address their clients’ needs and grow the business within the brokerage but found themselves continually “running into walls” when it came to being able to offer new solutions or market their services.
“It wasn’t even on our radar to start our own firm. We just knew we could no longer do our best for our clients at the wirehouse,” she told me. “Not one of us were particularly entrepreneurial, but we were good businesspeople and grew a very successful business even with the limitations of the big firm agenda. We just knew we could go no further in the brokerage world.”
Leaving behind that “big firm agenda” has become the real draw to independence. For example, independent advisors can:
- Shop the Street for the best prices on lending, insurance, trust services, alternatives, investment banking and virtually anything else.
- Offer access to things like concierge services, bill pay, tax planning and preparation, and private investments.
- Bill clients on a non-AUM basis.
- Build a brand and leverage their voice on social media.
- Serve their clients as a true fiduciary.
- Build a legacy with long-term equity value.
Yet for all that the independent world offers, what stops many advisors from breaking away is the fear of having to do it all themselves. And while even just a few years ago breakaways may have found themselves handling more of the initial build and day-to-day operations than they liked, the independent landscape has changed.
A robust cottage industry has been born to support breakaways in just about every aspect of the business, making startup and management far easier than it was in years past. Custodians, service providers, broker/dealers, product manufacturers, consulting firms and sources of capital are all part of this burgeoning ecosystem. Advisors are free to pick and choose the support they need and outsource where they may lack desire, talent or the ability to handle on their own.
For example, take Michael Henley, a Merrill Lynch breakaway and now founder and CEO of Brandywine Oak Private Wealth. In an episode of my podcast series, Mindy Diamond on Independence, I asked Michael if he was driven to leave Merrill by a pull of “entrepreneurial spirit”—that is, some innate desire to strike out on his own. His answer was a resounding “No.” He told me the aspect of owning his own business didn’t come to mind until he saw things changing at Merrill and couldn’t live with the lack of control he was feeling there.
Last year, Michael and his team associated with Dynasty Financial Partners to address all of the moving parts of running a startup independent firm, so that they could focus on serving their clients and growing their business—instead of worrying about who would “negotiate lease terms or pay the cleaning service.”
As the desire to do more and do better without limitation continues to build among captive advisors—with an entire cottage industry providing support—the momentum toward independence will continue.
Mindy Diamond is president and CEO of Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.