The independent model is becoming increasingly popular in the financial advisor industry, and it is likely that many more broker/dealers will choose to go independent in the future. As a result, it’s important to stay informed about industry trends and developments, and to be prepared to adapt as necessary. Navigating the journey toward independence as a financial advisor is an important decision that demands careful consideration. It’s crucial to ask the right questions to ensure the transition, if it is what you decide to pursue, goes as smoothly as possible.
Every advisor’s situation is unique, but to start the process, it is important to ask yourself these five questions.
- Is independence right for you?
- What will you be giving up if you make the move to independence?
- What do you expect to gain?
- What is it your clients value most about you?
- How will you put independence to work in growing and evolving your business?
1. Is independence right for you?
It’s essential to evaluate and determine if independence aligns with your professional goals and aspirations. You will need to consider if it measures up with your long-term vision for your practice. Understanding the motivations behind your desire for independence will help you articulate your vision and make informed decisions. Whether it’s a desire for greater autonomy, a more client-centric approach, or other factors, clarity on your objectives is paramount. Are you prepared for the challenges and advantages that come with it?
Choosing the right vendors is also a critical step in setting up your independent practice. Evaluate potential vendors based on their reputation, services offered and if it’s the right fit with your business model. Make sure you seek recommendations from trusted peers and industry associations.
2. What will you be giving up if you make the move to independence?
Independence often means leaving behind the structure of a larger firm. This includes administrative assistance, compliance guidance and access to proprietary products. You will need to evaluate what resources you rely on and identify how you will replace them and adapt in an independent setting. Allowing yourself to understand what you will be giving up will allow you to proactively plan for the transition.
3. What do you expect to gain?
Independence offers a wide variety of benefits, but it’s important to be clear about what you hope to achieve professionally. Will you seek greater control of your business decisions, a more personalized client experience, or the ability to offer a broader range of products and services? As you navigate the path to independence, clearly defining your objectives will serve as a compass. Independence awards you the opportunity to build your own brand. Consider how you’ll differentiate yourself in the market and maintain control over client relationships/agreements and data. Establishing solidly built client agreements and data management practices is crucial.
4. What is it your clients value most about you?
Your clients have chosen to specifically work with you for select reasons. It could be your expertise, personalized service or the trust you’ve established over the years. Understanding what your clients value most about your relationship will be a great indicator of how to structure your independent practice. Communicate your plans transparently as you transition the practice to assure your clients and demonstrate your commitment to their needs and what they value about working with you. If you are looking to become independent, you will want to act as a fiduciary always putting your client’s interests first.
5. How will you put independence to work in growing and evolving your business?
Another important question to ask in this section is if you have the right partners in place to support successful independence. This includes custodians, compliance consultants, technology providers and any other service providers that are crucial to your practice. Thoroughly vet potential partners to ensure they align with your vision and offer the support you need.
Independence presents an opportunity for growth and innovation. Consider how you’ll leverage this independence to enhance your practice. Will you have the right partners in place who will allow you to focus on niche markets, expand your service offerings or adopt cutting-edge technology? Establishing a concrete plan for your independence will set you on a path toward sustainable success.
Every advisor’s journey to independence is unique. It entails careful planning and thoughtful consideration. By asking these critical questions you will be well-prepared to make informed decisions and pave your path for a successful transition to independence and be ready on the road ahead.
Trey Prescott is Director of Business Development at Advisory Services Network.