What is in this article?:
In this interview, Michelle discusses her decision to leave the wirehouse world 6 years ago (she was a “breakaway broker” long before the term was even coined), her partnership with her mother, and her vision for Source Financial Advisors, the specialty boutique wealth management firm she launched several months ago.
MINDY DIAMOND: Let’s get to the next piece, which is all the talk in the industry about the “breakaway broker” (a wirehouse advisor who leaves the wirehouse and goes independent). You were a breakaway broker before the term came into vogue.
MICHELLE SMITH: Yes, I was. I was cutting edge (with a smile).
MINDY DIAMOND: If you were talking to a wirehouse advisor that said, “I believe that given my high net worth client base, I need a name brand firm behind me and the platform that the wirehouses provide in order to be successful.” What would you tell them?
MICHELLE SMITH: It’s such a myth. At a big firm you are myopic to a fault. And I understand this myth because I bought into it for years. I should have left and gone independent in 2000 when I was with PaineWebber. But I didn’t because I believed I needed a big firm under and behind me. I feared I would lose access to the right people and solutions. Now that I stepped out of that, I realize I’m standing here as an independent not on an island alone, but surrounded by an infinite number of firms, solutions and thought leaders, not just one wirehouse—I am scaffolded exponentially.
MINDY DIAMOND: But part of what comes up with that is the possibility of being overwhelmed by too many choices. Is it fair to say that part of what Dynasty does for you is to give you access to the right choices?
MICHELLE SMITH: Dynasty gives us access not only to the right choices, but the right customized choices for our business and our clients. They give us access and credibility.
MINDY DIAMOND: Anything you miss about the plug-and-play wirehouse world?
MICHELLE SMITH: Yes, I miss calling somebody in IT and having five people answer the phone. I know more about my copy machine than I ever wanted to know. I miss having my people making a call and then just like that there are technology elves that fixed everything. But I quickly came to realize that I can hire someone, or call someone or outsource almost any issue.
MINDY DIAMOND: How about the clients? How did your clients react to your decision to go independent and how do you believe that the decision impacted your prospecting and business development opportunities?
MICHELLE SMITH: My clients were my clients. I think in 2006, we were pre-Madoff and pre-meltdown. Nobody cared where you custodied. Nobody asked. New clients now ask where we custody assets. There’s a difference. People understand what could go wrong--they're more educated. But even now it’s not a problem. Clients end up with the advisors they trust as long as you can demonstrate that you can do the job for them and their money is safe. We clear through Fidelity. It’s Fidelity; they are huge. You can clear through so many big firms. That stuff is easy to talk about. You show them that they aren’t going to get a statement on an Excel spreadsheet. That’s the easy part.
MINDY DIAMOND: Have you ever lost a prospect or a business opportunity because you were not with a name brand firm?
MICHELLE SMITH: Yes, just like I lost business when I was in a big firm because I wasn’t a boutique.
You're going to get the clients that should be with you and the ones you don’t, you move on. There is no shortage of money in this country. If they're supposed to be yours, they will be. That is my mantra here. You do the best you can at a presentation. They're either going to connect with you, your methodology and your business structure or they're not.
MINDY DIAMOND: What other options did you consider before you made the decision to go independent? I mean with wirehouse deals being at an all-time high, did that ever enter your mind?
MICHELLE SMITH: Yes, that check was hard to resist. That’s honest. But guess what? These checks are often spent within the first year or they are simply deferred spending accounts versus creating equity and enterprise value. I have taken a check before and believe me, it is such a big difference to create equity and enterprise value rather than to just settle for an upfront check that is quickly spent and taxed and then I’m bound to the firm for the next decade or so.
MINDY DIAMOND: I’m guessing there’s not much you can't do for clients today?
MICHELLE SMITH: I can do anything. We can pay bills. We can do their taxes. We can really create a family office environment for people. We can report on 401(k)’s, we can track deferred comp such as restricted stock units and stock options. We can do it because the technology available for the independent RIA space is phenomenal.
MINDY DIAMOND: What’s next for Source Financial Advisors? What is it going to look like five years, ten years from now? What do you suspect the end game looks like for you?
MICHELLE SMITH: Five years from now I want to double in size. I want to hire quality advisors that fit this specialty mode; those who would benefit from the platform we’ve created, the branding we’re able to offer and be able to further leverage our Dynasty relationship. In ten years I will be 58 years old. I would love nothing more than to have some sort of a monetization event where a big company takes a stake in us but still keeps us as Source Financial Advisors. This would be a game changer in this industry and would confirm my belief that the generalist model is a dead one.
MINDY DIAMOND: How do you spend most of your time now? Does the heavy lifting of running the business and getting your hands dirty take up most of your time?
MICHELLE SMITH: No. It’s more of a joke than anything. I hire people to do things. We have incredible people here from my assistant all the way to the President and COO, who happens to be one of my best friends. No, my day looks like a typical business owner’s day. It’s strategy. It’s planning. It’s some managerial work and some financial advising. It is controlled chaos but with a very strategic underpinning.
MINDY DIAMOND: Got it. Last question, finish this sentence: The best thing about being independent is . . .?
MICHELLE SMITH: Control. Total and complete control. It’s beyond exhilarating!