An Uncertain Future for Frustrated FAs

Another wirehouse?

Sometimes an FA will consider migrating to another wirehouse, attracted by a big check in exchange for ownership of the book of business they’ve worked so hard to build. Although the 7 to 9-figure check comes with strings, tax consequences, and is below market value, it does satisfy the allure of immediate gratification. You might wonder, though, whether the wirehouses are any different from each other. They all are straddled with ever-changing compensation plans, corporate policies that benefit the shareholder over the client, and a business model that requires managing to the lowest common denominator. If an FA can tolerate this environment, then they might as well stay put and avoid the hassle of packing and unpacking.

Flexibility with a regional

What if the conveniences of a bank (integrated product suite, institutional technology, etc.) could be found on a smaller, more “friendly” scale? This is where regional banks have an opportunity to offer FAs a nimbler and more flexible environment, where the client experience matters, and service is a priority. If you’re okay being an employee and are just seeking a better culture this might be your answer. Be advised, however, that there will be challenges mapping products and solutions from a larger company, the lowest common denominator is likely not any higher than your current firm and some regionals shun the concept of teams in favor of an army of individual advisors marching to a single corporate brand. The biggest drawback to this option is that you’ve really gained no control or autonomy. Your compensation, account minimums, fee schedule, corporate policies, etc. are still dictated by your employer. Your bet is that your new boss will be less likely to abuse this power than your current one. You’ll have to overweight/underweight the list of pros and cons for this option.

Many options with the independents

The independent space continues to trend towards overtaking wirehouses in total assets under management. Since there are multiple models to choose from among independent platforms, there are many options to consider. Some provide stability to the FA as a W2 employee, others provide true independence as a business owner.

A simplification of the options comes down to the question: How much do you want to do yourself versus how much are you willing to outsource and pay a third party to provide or manage?

Some FAs prefer to stand completely alone, assuming all responsibilities and all risks – and they pay for that privilege both indirect costs as well as time away from clients and prospects.

Most FAs look to balance the support they can get from a platform with the cost of paying for those services. Ultimately, it’s not about one provider being better than another as much as one provider is a better fit for the FA – and what they want to achieve.

Some independents take the “teach a man to fish” philosophy and provide guidance at a consultative arm’s length. They’ll sell you any of the services you need, but otherwise, you’re on your own and they are careful not to take on any of the regulatory or financial risks associated with your business.

When an FA desires more structured support so they may focus their time on serving clients and growing their business, “supported independence” may be the answer. Several companies offer platforms to independent business owners that include compliance and supervision – taking on the regulatory risk and burden, custodian solutions, payroll and billing, and tech integration and support. Their goal is to provide a turnkey operational structure.

Other supported independent providers offer more of a partnered approach that also includes start-up financing, transition support, client experience and practice management support, M&A, strategic capital, a turnkey asset management platform (TAMP), and access to value-added affiliated businesses.

Some even go deeper into the partnership model and look to acquire anywhere from 10% to 100% of the FA’s business – allowing the FA to become either a well-backed business owner or an employee again, but on more favorable terms. There are supported independent providers who require that you sign an agreement to sell them all or a portion of your new business and others who simply make that option available to you.

Are wirehouse advisors finding that the opportunity is better somewhere else? By taking the time to treat themselves like their own clients, FAs are investing time into the due diligence needed to identify the best option for their future – and for building a path forward toward a future that aligns with their own goals and values.

Vince Fertitta is president of Sanctuary Wealth, an Indianapolis, IN-based advanced platform for the next generation of elite advisors who have the entrepreneurial spirit to build and manage their own practices.

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