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William E Hamm CEO Independent Financial Partners
<p>William E. Hamm, CEO, Independent Financial Partners</p>

What to Consider When Thinking About Joining an Independent RIA

As the financial services industry continues to evolve with different channels of back-office support, smaller practices have greater opportunities for ownership, the ability to customize the way they serve their clients as well as greater financial rewards. In the current market, smaller advisors are often unable to meet their business potential because of the high fees they face and their lack of external resources. I speak with several advisors a week who just want to focus their efforts on serving their clients and growing their business—not on the logistics of dealing with compliance regulations, technology problems and other time-consuming activities. For smaller producers or two- to three-person shops, the best option may be to go independent and join an RIA or hybrid RIA.

Large firms that offer investment, compliance, marketing, technology, and client-relationship support are an increasingly attractive solution as they are structured to offer the scale that smaller practices need. As I said before, they allow advisors to focus on both building their business and providing the most valuable service to their clients.

Why aren’t more small practices making the move? Many advisors don’t take action simply because they’re unaware of the opportunities that exist, or they might lack an entrepreneurial spirit. Prior to deciding to choose a new path, advisors should evaluate the most fitting options for their practice and determine how new opportunities could potentially affect their clients and business.


Here are a few questions to consider:

In what capacity do you work for your clients? Advisors need to be aware of the specific way in which they want to serve their clients. For example, is the advisor an asset gatherer or asset manager?  Is the advisor’s business mix primarily fee or commission?  The answers to these types of questions can influence which independent channel you choose. 

Do your clients value YOU or the brand behind you? Some clients may have chosen to work with an advisor due to the brand name with which they are associated. They may be hesitant to transition to an independent firm because they don’t have brand name recognition.  I think it’s important to realize that in most cases, clients work with the advisor because of who he or she is, and not their parent firm.  This is evident in the fact that most of the advisors that transfer to the independent channel bring the majority of clients with them and some even use the move as an opportunity to remove some clients with whom they no longer wish to work.  In addition, due to the lower fees and higher revenue sharing independent advisors enjoy, it may only be necessary to transition between 40% and 50% of your clients to maintain your current profitability.

Can your current firm restrict your flexibility? Advisors need to be aware of the protocols that may restrict them from contacting clients before or after transitioning, as some firms have strict regulations on what you can and cannot do. Do your homework and consult with legal counsel before making any moves!

Do you want to be an owner? Going independent means that advisors are more in control of their own business decisions. For some, this can be daunting as their current firm may handle most, if not all, decisions that can impact an advisor’s business and procedures on a daily basis. For those interested in taking true ownership of their practice, independence provides the best opportunity for that to happen.   Being independent allows the advisor to control their expenses, facilities, technology, branding and other aspects of being a financial firm.  They no longer have to pay 4 levels of supervisors that in many instances do nothing to contribute to their success.  There is also a great deal of satisfaction in being one’s own boss.

Do you have an opportunity for higher revenue sharing? Higher revenue sharing is one of the appealing differences for most advisors in that independent RIAs and hybrid RIAs can provide a significantly higher payout for their advisors than many other firms. Some of this is offset by expenses but in the final analysis, most independent advisors take home a greater percentage of their gross revenue.  What is your current payout? While greater financial reward for what you do is just one of the reasons to think about making a change, it certainly can be worth looking at other alternatives to see if you can be making more. 

Independent firms with scale allow advisors the ability to take ownership of their businesses, control their own programs and provide their clients with better services. They are committed to providing operational, strategic and revenue-generating resources that will allow advisors to successfully build their practices and advise their clients. Independent large RIAs and hybrid RIAs can be an effective solution for smaller practices as the industry continues to evolve.


William E. Hamm is CEO of Independent Financial Partners, an independent SEC-registered investment advisory firm located in Tampa, Fla. with a network of over 500 advisors nationwide.


Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partners, a registered investment advisor and separate entity from LPL Financial.


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