It’s tough making the decision to move towards independence, to leave the wirehouse. There can be a lot of hesitancy around the move and a lot of fear: fear of leaving the known, fear of failure, fear that you don’t know what you don’t know. While I’m sure there are many very healthy egos amongst the readership, when we’re alone in a quiet place, we tend to give ourselves much less credit than we deserve. I don’t know what lurks in your particular shadows, but one thing’s for sure - it looks really big, dark, and scary in there. The good news is that some of the things we think are scary don’t actually exist. In other cases, the scary things are there, but you can eliminate them with a number of solutions. What I’ve learned over the years is that you can make the shadows a lot smaller, a lot lighter, and a lot less scary.
I’ve worked in both BD and advisory operations and compliance for 27 years. People ask me how I got to where I am in the industry, particularly since I started work in the late 80s, when things were very different for women. In a word, I was naïve. I didn't know that there were significant, intangible obstacles in my way. The same has applied in the move away from a wirehouse to an independent model. Since our launch in late 2012, my partner and I frequently run into our wirehouse counterparts and hear the same stories about our move to independence:
“I could never do what you’ve done.”
“What if I mess up? There’s no safety net. I’ll lose everything.”
“I’ll be all alone as an independent, and I don’t even know where to start.”
I understand, and I shared all those feelings, but I chose to ignore or eradicate them.
After nearly three decades in the industry, I’ve learned through instruction, experience, trial, and – most definitely – error. Michelle Smith and I run Source Financial Advisors, our own NYC-based boutique wealth management firm, managing close to half a billion dollars. We’ve put our blood, sweat, and probably a couple of tears into building the infrastructure that lets us sleep at night. Because of that, we have the confidence to dream wildly while we’re sleeping. Michelle loves to say that she “chases sparklies”, and she does. We both know, though, that there could be no productive sparkly-chasing without a rock-solid foundation on terra firma. There are some critical things I’ve learned and myths I’ve busted on the road to becoming an independent advisor.
Myth #1: You Need Your Wirehouse
It’s a false belief that the resources you rely on will dry up in an independent environment. When Michelle and I came from the wirehouse, we, too, were afraid of losing access to information and solutions. We didn’t let that stop us. I’m a problem-solver, and I know that an obstacle set before me can be solved with one or more of three resources: technology, labor, and money. That trusty toolkit comes from experience.
Because we’ve built a collective body of knowledge over our years in the industry, we knew independence would give us the advantage of choosing the resources and solutions that were right for us and our clients, without the constraints of a wirehouse.
Perfect example: We were able to obtain multiple bids and creative execution solutions for a client’s extremely large concentrated stock position. Four investment banks offered their strategies, and we made the optimal decision for the client. That’s not something we would have been able to do at our prior firm. In this instance, we actually gained resources in our independence. We are continually able put the client first, in every situation, and choose the best-in-class solution for each personalized scenario.
Myth #2: You Don't Know Anything About Business Ownership
The fear of leaving and fear of creating are two sides of the same coin. An independent financial practice is a business like any other. Every enterprise has start-up costs and structural considerations. The length of the list is far too long to detail here, but each item on the list can be met with help and appropriate research. The real problem is that the idea of starting your own business is part of the shadows, where there is the fear of what you don’t know you don’t know. Get selective about the shadows. Decide that you don’t care if you don’t know what you don’t know about certain aspects of business ownership, or launching an RIA, knowing you can obtain a solution to fill the gap. Trust that you know how to do your homework, and that the things that have gotten you to where you are – efficiency, intelligence, and accuracy – are still what really matter, and what will propel your success.
You now have choices with this challenge: can you implement technology, figure it out yourself, or pay a consultant to help or execute entirely? Great – check it off your list. Personally, I chose to figure it out myself in most cases. I did, however, have the luxury of time. Anyone considering advancing to independence has neither the luxury of time, nor the ability to get paid to learn. You get paid to manage your clients’ wealth, not learn how to secure professional liability insurance, or negotiate a commercial real estate lease. Managing your clients’ wealth is also, hopefully, your passion. I’ll go out on a limb and surmise that professional liability insurance and commercial leases aren’t, nor are the myriad other obligations. Again, not a reason to worry. Outsource the things you don’t know, and knock out the list of the things you do. Make a strong business plan, pay attention to detail, and get a good team in place, internally and externally.
Myth #3: Your Clients Won't Follow You
When Michelle and I started as women in the industry, we were a novelty. We got past being a novelty ten years ago and moved into expertise. We help our clients manage the personal and professional aspects of major life transitions. We want to provide an environment for our clients that is unique, and built on the knowledge developed over our years in the industry. Being independent has allowed us to offer a stellar client experience because we have the variety of choices that are available outside a wirehouse, and the flexibility to make those choices without conflict.
Our clients made the transition with us because of our expertise and passion. They weren’t held back by the lack of a nationally recognized and trusted household name on the door. They came with us because we were a recognized and trusted name in their own household. You’ve won your clients with your own skillset. You’ve earned their trust, and they will remain with you.
Best Thing About Independence
Transitioning can elicit a lot of concern, and can certainly be daunting. It does not, however, need to be a source of fear. In the beginning, I just started with one challenge, tried harder, and went on to the next. The myths that I’ve enumerated and the fears I haven’t can be eliminated with the resources you engage. You have the power to make the shadows irrelevant. Your passion in managing your clients’ wealth is the same passion that will drive you to succeed in your independence. I began by saying that everyone, to some extent, has the fear of failure. Some cannot tolerate that fear, and choose to avoid it at all costs. Independence is not for everyone. If you are comfortable in a corporate environment, you may be happier staying at a wirehouse. If not, though, ask yourself this: What would I do if I weren’t afraid?
Kristen Niebuhr is the President and Chief Operating Officer of Source Financial Advisors, located in New York City. Source is a member of the Dynasty Financial Partners network of independent wealth management firms. For more information on Source, please visit: www.sourcefa.com. For more information on Dynasty, please visit: www.dynastyfinancialpartners.com.