When it comes to making the move to independence, it’s important to take things step by step to ensure you’re properly prepared to make the transition. In this issue we spoke to Jeff Zabel, Director Institutional Sales at TD AMERITRADE Institutional, which uses a consultative three-step approach with advisors looking to go independent. Read on to learn what advisors need to think about during the first phase—exploring independence. Stay tuned in the coming issues for help on evaluating your options and ultimately making your move.
Determine your driving factors in making a move
The things you need to think about when exploring your independence include: What’s motivating me? Is it financial? Am I looking to retain more of what I earn? Is it because I want to better serve my clients? Is it the ability to call my own shots and have complete control over all the aspects of my business? Do I want to create the most value for my practice? You need to figure out what’s important to you so you can determine that the move you make will maximize your success.
Do I want to start my own firm or join an existing RIA?
There are two main pathways to achieve true independence, and which path you choose depends on certain factors including your personal goals and objectives, your appetite for taking on risk and your interest in running your own business. For example, do you have an entrepreneurial spirit? Do you want to run your own business and maximize your payout potential? If so, you might consider creating your own RIA. Or perhaps you’re not quite ready to go completely solo, but you like the idea of a fee-only business and find the many benefits of becoming an independent RIA appealing. In that case, you might consider joining an existing RIA. Your current assets under management and firm size may also help guide your decision. For smaller advisors just starting out, joining an existing RIA may be a smart move because you can benefit from the infrastructure in place at the hiring RIA. You can enjoy many of the advantages of independence whether you choose to join or start an independent RIA; it just depends on your personal goals. You might also consider joining an independent broker/dealer that promotes a fee-based business and an open architecture.
You also need to consider what you want your business to look like in the future, and what value you can create for yourself. If you have a commission business now, do you want to maintain it, or are you interested in moving toward a fee-only structure? If you want to maintain a hybrid model, you need to think about using a brokerage firm with an open architecture that will allow you to keep some of your commission-based business. These decisions can have an impact on the economics of your future business. At TD AMERITRADE Institutional, we can help advisors who are looking to maintain some commission-based business through our Broker/Dealer Network, which can help refer advisors to a firm that meet their needs.
How will this move benefit my clients?
While you can’t talk to clients about your plans this early on, you do need to spend a significant amount of time laying out in your own mind why you are considering a move. Once you have your plans clear in your mind, you’ll be better prepared for handling questions or concerns from clients later on. Consider, for example, the broader product array you’ll likely have as an independent advisor. Independent RIAs have a fiduciary-based relationship with their clients and this can help keep RIAs focused on their best interests. Once clients are educated and informed on what your transition to becoming an independent RIA means for them, they may be more comfortable and perhaps excited about your move.
Consider the nuts and bolts
The real key is looking at whether you want to join or start a firm. If you’re looking to join a firm you need to find an RIA that matches your culture, size, investment philosophy and geography. There are ways to do this on your own, but at TD AMERITRADE Institutional, we offer a referral program, TD AMERITRADE AdvisorLinkSM which can help introduce advisors to firms who are looking to hire or acquire new talent. When starting your own firm, you’ll need to map out a business plan that takes into consideration things like operational support, technology requirements, staffing, office space, compliance, marketing, etc. All of this analysis, however, comes after you’ve assessed your reasons for going independent and have an inclination towards which path you believe best helps you achieve it.
What regulatory matters should I consider?
Whether you choose to join or start a firm, considering the legal implications of your move before you set sail is an important part of the process. In my opinion getting competent legal advice is crucial to the process, no matter what road you consider. We work with many excellent compliance consultants who have helped advisors make a transition smoothly and uneventfully. When you do make a move, you want to make sure all the bases are covered. TD AMERITRADE Institutional has a lot of experience in helping advisors transition, and there are other resources out there that can guide you through the process as well.
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Jeff Zabel is the Director, Institutional Sales at TD AMERITRADE Institutional. TD AMERITRADE, Inc., member FINRA/SIPC.
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