Finding the best team of associates for your RIA firm takes work, but the benefits of a team versus a solo shop are substantial. That’s because RIA firms don’t have help from broker-dealers provided to them. Many advisors tend to have a special niche such as financial planners or investment oriented advisors that set them apart from the rest. You should look for an advisor whose niche complements yours. This will provide added value to your clients and they will appreciate it.

If you decide to start your own RIA firm, make sure you have a solid business plan. If you want to bring on a partner, make sure you discuss what specific job functions each with perform. A well thought out business plan will help prevent issues that could ultimately end your partnership. When there is a team set in place and everyone has a specific job function, your business will run smoother.

Having a team will also make it easier to transition clients to junior advisors when the senior financial advisors retire. Clients will be less likely to leave your firm if they still receive the same service they are accustomed to.

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Many big firms are utilizing the best technology to lure advisors to come on board. One of the main concerns of advisors looking to breakaway is whether or not they will have the availability to properly service their customers with the most advanced software. It puts advisors at ease knowing that their platforms will run smoothly.

If you are an RIA firm looking for breakaway advisors, make sure you have a client relationship management (CRM) software program that functions properly with financial reporting and portfolio management systems. An advisor who breaks away from a wirehouse is used to the best technology and will look for an RIA firm that offers something comparable.

There are so many different software products and trading platforms necessary to run a successful business. Make sure all of the software programs you offer integrate together. New integration products are being designed to help your firm run as smoothly as possible.

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Are you one of the many financial advisors thinking about going independent? If so, make sure you have a solid plan. The transition process can be extremely smooth for your clients who follow if you have developed a business plan. This transition process typically takes up to a quarter as well. Lack of preparation could halt your new business before it takes off.

Advisors need set goals for their new business and consult with financial professionals and legal experts for advice and to assure there are no restraints from leaving their current firms. Many times there are signing bonuses or outstanding loans that need to be resolved before advisors can venture out on their own.

Financial advisors also must know the policy their current firm has on taking their clients with them. The last thing you want is to get sued or have a temporary restraining order placed on you just when you are starting your new business. This is where legal advice is important. Attorneys can review your contract or the rules before you move to ensure there will be no issue.

The good news is, once you have a solid business plan and worked through all possible issues, the majority of your clients should follow if you go independent. Clients tend to follow their advisors going independent because they hire the advisor, not just the firm.

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For the past few years, many breakaway brokers have decided to start their own RIA firm to gain independence from the wirehouse world. They have now been looking for our assistance to help grow by adding new financial advisors. We have seen an enormous growth in RIA firms looking to expand their business within the next few years.

Advisors looking to expand their business need to consider a few things first. They must have a solid plan on how they intend to grow their business. Also, they need to consider what type of advisor they want or need to join their firm. For example, is your company in need of an advisor who has a particular specialty that your firm currently lacks such as tax, retirement, or even divorce planning?

Another important factor to ask is will you be retiring within a few years and in need of succession planning? If this answer is yes, it may behoove you to look for a junior or younger financial advisor who can learn from your practices and ultimately take over your book of business. If you are not planning on retiring any time soon, then you should be looking for a seasoned advisor who already has a well-established book of business.

There are a multitude of questions advisors must ask themselves before they decide to grow their business to make sure they find the right fit. If you have a solid plan and have thought about what your business needs to thrive, you are one step ahead of the rest.

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Working for a wirehouse, brokers have to work hard building a book of business to keep up with the production numbers that are expected from them. Retaining their clients is a major focus as well. This is why it is not surprising for most clients to follow their wirehouse brokers when they breakaway to an RIA/independent.

According to a report from the Aite Group,

Wirehouse brokers tend to breakaway because the brand name of the wirehouse has been tarnished. After the financial meltdown, wirehouses still managed to make a fortune leaving a bad taste for advisors and clients alike. In fact, some clients initiate the process of leaving wirehouses for RIA firms on their own.

Since wirehouse brokers already have clients who will follow, the transition from wirehouse to independent is much smoother. Advisors don’t have to build a book from scratch and have a solid foundation. According to the Aite survey,

“Sixty-eight percent of independents who originated from wirehouses have chosen fee-only or dually registered RIAs.”

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There has been a substantial increase of breakaway brokers so far this year. According to TD Ameritrade Institutional, “…212 breakaway brokers have joined its network during the first three quarters of its fiscal year 2010. That’s a record amount for the first three-quarters of any fiscal year for the Jersey City, N.J.-based RIA custodian.”

Typically, years ago, brokers left the wirehouses because they wanted to go independent and run their own shop. Now, with the economy still trying to recover, these brokers are looking to join existing Registered Investment Advisory (RIA) firms. They don’t want all the risk that is involved with setting up their own firm. Tom Nally, the company’s managing director of sales, states,

“What we’ve seen after the financial crisis is that the visibility of the independent model has expanded and we’re seeing folks who are less inclined to be entrepreneurs who want to take advantage of the independent model by joining existing advisors.”

Even though there is an increase in breakaway brokers to RIA firms, there is also a considerable amount of wirehouse brokers breaking away to other wirehouses.

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One of the primary focuses financial advisors have is taking care of their existing clients while developing new clients and growing their business. The time spent focusing on compliance and paperwork is not a beneficial use of their time.

Breakaway advisors have to spend even more time transferring their clients’ accounts and making sure all the new account paperwork is filled out correctly. This is where the Super OSJ comes in. According to The Rise of the Super OSJ, Christina Mucciolo states,

“(The Super OSJ is) an extra large office of supervisory jurisdiction, or independent b/d branch that both supervises and provides consulting and business services to other independent advisors for a fee.”

Financial advisors either need to hire someone licensed to become an OSJ for the firm or they have to do it themselves. This could get very costly if you are paying a non-producer a six-figure salary to oversee all compliance issues. The fee for a super OSJ is usually based on a small percentage of the advisor’s gross revenues. These firms not only oversee compliance, but will help breakaway advisors with training and help transferring all accounts over with all the correct paperwork. These firms also offer as much or as little guidance as you need.

Patrick Sullivan and John Hyland of Morristown Financial Group say,

“80 percent of the advisors affiliated with Morristown Financial Group pay two percent or less on gross revenues. Advisors pay on a sliding scale based on production. The highest fee is 15 percent.”

Using a super OSJ will provide breakaway brokers with a smooth transition into the independent world in a fraction of the time.

Stuart Porterfield, former national sales manager for Wachovia Securities Financial Network (FiNet), says,

“While the breakaway broker trend has slowed a bit since 2009, it is not going to die out, and the kinds of brokers who will go independent in the future may be the very ones who most need the services of an OSJ. It used to be that only financial advisors who were wired to create, own and run their own small business would go independent, but these types only represent 10 percent of wirehouse advisors…”

With the ever-changing regulations in this industry, it gives advisors peace of mind that their compliance can be current and up to date at all times without all the hassle.

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I have often had asked of me by potential breakaway brokers why they would want to join an established RIA, versus going “truly” independent by opening their own independent registered advisor.

Probably the most influential factor is accessibility to existing resources without having to reinvent them yourself. You have immediate access to professionals already operating in the RIA arena who have the experience and processes and technology already in place. Combine this with the amount of time, money, and responsibility it takes to start your own RIA.

Also, you have the ability to expand your business by moving into another geographical area if you want, thus getting access to new types of clients. You’re partnering with another firm—you’re creating more equity.

If you’re considering joining an established RIA, or have concerns you want addressed, let us help you with an assessment of what “going independent” is all about.

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