Ongoing consolidation has fundamentally transformed the landscape of choices for elite financial advisors with an entrepreneurial fire in their bellies. All too frequently, independent advisors feel trapped by what they believe are limitations regarding the types of wealth management enterprises they can join.
For these advisors, it might seem like they only have three real choices: First, partner with an RIA consolidator who, in the end, could control how the practice would grow. Second, go independent with a large IBD enterprise—or warehouse firms, as they are increasingly known—that offers huge up-front payouts but limited flexibility defined by cookie-cutter solutions and services. Third, they can go it alone by setting up their own RIA under a complete “Do It Yourself” approach, assuming all the compliance, technology and other responsibilities that do not directly generate revenue and consume enormous amounts of time, energy and capital.
Here’s the problem with this approach: It’s not just a no-win situation for many—it’s an incomplete set of options.
Moving Beyond Disruption to a New Era
For years, we’ve heard about the need for disruption in our industry—we have moved beyond this into a new era for wealth advisory services. Demographic changes, shifts in consumer behaviors, digital innovations and heightened expectations can accentuate the gigantic gap between financial advisors and clients who need to be served. It makes little sense for elite, entrepreneurial advisors to sell their businesses now or limit their opportunities with large firms interested only in their bottom lines.
Advisors serving more sophisticated and demanding clients who have made the increasingly popular decision to become independent wealth management business owners need the freedom, flexibility, control and choice to make complex decisions for increasingly demanding clients. To build on these four mission-critical pillars of success, these advisors need a partner to help them take full advantage of what may be the most impressive period of growth our industry has ever seen.
Freedom & Flexibility
Moving from a wirehouse can be difficult, especially for top advisors who have achieved a certain level of success working in the captive model. There is understandable inertia and a feeling of security of remaining in an often well-paying, stable situation. There is also the fear of the unknown.
However, the best advisors at the wires have built their practices and reputations over the years by attracting the best clients. In the current environment of changing client demographics and heightened expectations of service providers, these once-solid clients want more from their advisors. To maintain their best relationships in the near to long term, advisors will need the freedom to make decisions that are in their client’s best interests and the flexibility to offer investment solutions that might not be available within the wirehouses.
Control
Once an advisor or team leaves the wirehouse or bank, they need to ensure that their new home enables this newfound freedom and flexibility by granting them the control they need to run their businesses how they see fit for themselves, their staff, and most importantly, their clients.
Independence has become so attractive to many because digital technology, third-party asset management solutions and other resources have leveled the playing field, allowing advisors to cut the cord confidently with the wirehouse or IBD warehouse. However, providing access to a new tool and services in a genuinely independent environment is only helpful if the firm allows an advisor the control to ignore it all and run their business the way they want.
Choice
Without the critical element of choice, top advisors can’t get everything they want in a firm. They often get stuck in the wrong structure or culture because they are not presented with all the options when making their decisions.
Freedom, Flexibility, Control and Choice
All four elements will usher in a fundamentally different era within the independent wealth management industry—one marked by a supported yet free-from-constraints independence. I fully expect this to be the future model, with consolidators, wirehouses and warehouses falling away in favor of a structure that drives growth, delivers results and allows advisors to build their businesses, equity and futures as they see fit.
Adam Malamed is the CEO of Sanctuary Wealth.
