Unlocking Real Value Blog

To Go Independent or Not to Go Independent?

This battle has been raging for a number of years now, and is apt to continue. An article in today’s RIABiz caught my eye, as it recaps a study which cited that the trend of wirehouse advisors going independent may slow as the recent mergers among the largest wirehouses start to show positive synergies. It also mentioned that many wirehouses are beginning to devise ways to allow advisors to operate more independently within their structures. All good points – but as important to this trend – and its future direction –  is not only the firms themselves, but the characteristics of the advisors.

It is natural that the trend toward advisors becoming independent will ebb and flow. Certainly the financial crisis hurt wirehouses, as the reputation of many – UBS for example – were tarnished. What has been the cache of working for a firm that was well known became a negative. The “shotgun” marriage of Bank of America and ML, and the subsequent fallout didn’t do much to help wirehouses either. And the Morgan Stanley/Citi partnership has been slow to develop.

But as the article pointed out, advisors view their book as an annuity and they are going to do whatever is necessary to protect their business and their future. Wirehouses are not going to go away – they will adapt just as banks may have to again after financial reform is passed.

Another important consideration that is often overlooked, however, is that going independent turns an advisor into a business owner overnight. To me, this is the biggest issue that will determine whether an advisor or advisor group considers going independent or not if they decide that their current home is not the best place for them. I know many wirehouse advisors that would consider moving – but only to a similar firm (or to a firm that is up and running) because they don’t want the hassles of running a business.

There is a trade-off that must be made when the decision is made to switch firms. Wirehouses may become a great place to work again as the mergers work themselves out. But at the crux of the issue is whether or not an advisor can truly function in an independent environment or is more comfortable at a firm where many of the services are provided for him.

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