While the thought of transitioning to become an independent advisor may briefly come into consideration, financial advisors often cite complacency and fear as two of the main reasons holding them back. The good news is that there are steps you can take today to put you on the right path toward securing your first few clients and establishing a successful business. In this post, we’ll highlight some of the top benefits of being an independent financial advisor and offer some tips on how you can make the change as successfully as possible.
Good Life Companies is an industry-leading independent financial advisor network offering a full suite of services and tools to transition and support independent advisors and insurance agents. Learn more.
Why Work for an Advisory Firm?
Top broker-dealers and advisory firms offer registered financial advisors a comfortable lifestyle that continues to attract thousands of college graduates to the profession each year. When working for a major firm, advisors can expect the following:
- High income potential
- Medical and retirement benefits
- Reputable brand name (which can look good on a resume)
Even so, the benefits of advising clients independently heavily outweigh the benefits of working for another firm in the industry. Let’s take a closer look.
Why Become an Independent Financial Advisor?
Becoming an independent financial advisor is a decision that encompasses several significant benefits.
As an independent advisor, the opportunity to develop deeper, more personalized relationships with clients is enhanced, free from the constraints typically found in larger firms. This can lead to higher client satisfaction and loyalty.
Being independent permits a broader range of products and services to be offered, catering to a diverse set of client needs without being limited to a single company’s offerings.
The following are just a few benefits of being an independent financial advisor:
Become Your Own Boss
The feeling of being self-employed is one that can only truly be appreciated after working for an employer for several years. When working for a major firm, you are often restricted by the ideals, visions, and missions held and executed by members of the C-Suite. As an independent advisor, however, you can build your business from scratch in exactly the way you feel will provide you with the most long-term success.
Unlimited Income Potential & Fairer Compensation Structure
The typical financial advisory firm makes its revenue on an hourly basis or based on a percentage of client assets under management (AUM). Broker-Dealers fancy themselves on paying hard working representatives 30% while keeping 70% for the lending of their prestigious brand and platform. As an independent financial advisor, however, you can set and raise your rates, meet as many new clients as you want, and have a bigger financial stake in the outcome.
Customize Client Offerings
Every client has vastly different needs and applicable solutions to address them. For this reason, customizable service packages are becoming a preferred practice for a significant number of clients in the industry. Top advisory firms and Broker-Dealers are typically locked into a certain set of product offerings. As an independent advisor, you have more flexibility to alter your offerings to find the best products for your clients’ needs. This gives independent advisors a simple way to differentiate themselves from their biggest competitors.
Flexibility to Better Serve Your Clients
As mentioned in the last point, clients seeking professional financial advice require personalized attention. Financial advisors working for a firm will be restricted to using the products and software the firm provides, which may or may not provide the optimal solution for the client’s problem. Independent financial advisors, however, can use any product they choose, allowing them to adapt their advising strategy directly to the needs of the client.
Protection for Your People
As a business owner, you have control over your staff and payroll. While events like the fallout from COVID-19 may seem like once in a lifetime, it can bring you peace of mind to know that you’re in control. As an independent advisor and business owner, you are entitled to file for the Paycheck Protection Program (PPP), for instance, allowing you to avoid furloughing workers in times of crisis while maintaining your own income stream.
Tips for a Smooth Transition to Independence
After reading the benefits noted above, becoming an independent advisor may seem like an obvious choice. Deciding to jump ship and start your own firm is a significant career move that can take a lot of hard work—but it can be well worth it in the end.
Establishing a successful advisory firm, like any business, will not happen overnight. It will likely take several months before your organization is up and running with its first clients. Nevertheless, there are some simple steps you can take toward starting your firm. Here are some tips that can help to make your transition to independence as smooth as possible:
Create a Business Plan
This plan doesn’t have to be complex. It also doesn’t have to be a document that specifies all the business activities that will be taken for the next ten years. Your business plan should briefly outline elements such as asset mapping across platforms, systems integrations, necessary infrastructure, etc. Having this written document in place will help you stay on track as you continue building upon your initial ideas, minimizing distractions along the way.
A Hybrid RIA model often works best for advisors transitioning to independence. Under this model, the advisor is representative of both an RIA and a Broker-Dealer, allowing them to provide both commission-based services through the Broker-Dealer and fee-based services through the RIA. While the majority of your income may have been fee-based under the Broker-Dealer’s purview, as a Hybrid Advisor, your income can become truly fee-based through the RIA at Good Life or our corporate RIA at LPL.
Need assistance creating a business plan? Learn more about Good Life Financial Advisor Business Development services.
Have Financial Safeguards in Place
As a financial advisor, the importance of having a financial savings account is something you likely continue to stress upon your clients. This idea should be applied when starting your independent firm as well. Having up to three years’ worth of living expenses covered will take an immense weight off your shoulders as you work to grow the business.
Source Clients from Your Existing Firm (If Possible)
Many firms will place non-compete clauses in employee contract agreements that may prevent advisors from taking clients with them as they transition into an independent role. If this clause doesn’t exist in your contract, however, sourcing clients from your previous firm can be highly effective and lucrative. While these customers are already familiar with you and your services, you are also highly aware of their financial situation and goals. Maintaining close client-advisor relationships at your existing firm can be a good source for a loyal client base when you choose to go independent.
One of the great things about a Hybrid RIA business model, as mentioned earlier, is that you have the flexibility to offer both commission- and fee-based products. This is good news when seeking to retain your clients from a previous firm, as you can continue to serve clients in your book of business who have either of these products in their mix.
Reach Out to your Immediate & Extended Network
Many Americans are miseducated about the financial services industry and how they can transform their financial picture. Rather than having them hear the benefits of a financial advisor from a television ad, offer them your services yourself! You will be surprised by the number of people in your network who need someone to help them get a handle on their finances.
Consult Experienced Professionals
Even with its benefits, becoming an independent advisor has its challenges, especially for those inexperienced with establishing or managing a business. That’s where professional consultants can help.
Good Life Companies provides financial advisors with the help they need to start their independent business. We offer a full range of services to help you establish, manage, and grow your firm. From branding and real estate to lead generation, investment research management, and more, we work ensure that advisors are well equipped to enter the industry. Since 2012, we have helped hundreds of advisors across the country start and run their independent financial advisor firms.
Let’s Get Started
There are many benefits to being an independent financial advisor. Transitioning to independence can be pivotal to the future of your career, offering you great opportunities for growth than may be possible by continuing to work for a larger firm.
Are you ready to become an independent financial advisor? Schedule a consultation with Good Life Companies today to learn more about how we can help.