You have thought about going independent — and with well over 110,000 Independent Advisors across the United States, the trend toward practice ownership and breakaway brokers only continues to grow. One of the most important steps in your journey is to research and understand the different independent models and platforms, so that you can identify the next move that will be right for you.
In other words, you have thought about breaking-away — but have you considered where you want to breakaway to? Do you want to transition to a regional employee, independent, hybrid or RIA model which can offer you the culture and growth or succession opportunity that you are looking for? Do I need a hybrid model? Or should I go turn-key independent? Or, do I move immediately into becoming an RIA?
As the premier recruiting and consulting company for Advisors and Financial Services firms, the Executive Consultants at Terrana Group can help to simplify your firm and platform search, maximize your negotiated compensation, and smooth your transition from beginning to end. Our extensive experience allows you to discreetly and completely explore all of your options providing you with complete access to quality firms and platforms, including multiple opportunities of which you may not be aware when starting your search.
One such path that you may not have considered is to transition from a Wirehouse or Bank-Owned firm to a Regional or Super Regional firm, where you can gain the flexible culture and opportunity to channel surf seamlessly among the various channels that the Regional firm offers, while shouldering less financial, client, and personal risk — and setting yourself up to easily go fully independent within a few short years.
Regionals and Super Regionals: A Stopgap to Independence?
As an Advisor, navigating the breakaway broker transition is not always easy. Many Advisors feel more comfortable in the employee channel. Transitioning from a larger, Bank-Owned firm to a smaller Regional or Super Regional can be a useful and effective first step on the journey to independence, offering Advisors:
- A liberating, advisor-focused culture
- An easier and more seamless transition to independence
- A significant upfront payment and dependable payouts
Moving to a More Advisor-Oriented Culture
One of the biggest reasons that Advisors cite for considering this transition is culture. There is an enormous cultural difference when moving from a Wirehouse or Bank-Owned firm to a Regional or Super Regional. Broadly speaking, there is much less bureaucracy, less compliance restrictiveness, and a more Advisor-focused environment.
As you have likely experienced at some point in your career, firms tend to manage to the “lowest common denominator.” At a Wirehouse or Bank-Owned firm, this means that big producers and those who have been in the business for 20 or 30 years are still going to be managed and constricted just like the lower-level producers. This results in a culture that is less Advisor-oriented, and more restrictive overall. When Advisors want to stretch or try something new, the firm’s response is typically, “no, you can’t do that.” In contrast, at the Regionals and Super Regionals, the answer is much more likely to be, “yes, let’s figure out a way to get that done.” This makes it much easier for the Advisor to do business the way that he or she wants to do business, without leaving the employee channel.
Running Your Practice Vs. Running Your Business
As an Independent Advisor, there are two sides to operations — running a practice and running a business. When you run a business, you are responsible for everything, from running payroll, to hiring administrators, to creating vendor relationships, to ordering coffee and toilet paper for your office. That can be a daunting amount to take on, especially when you are considering moving away from a large Wirehouse or Bank-Owned firm.
One of the benefits of moving to a Regional or Super Regional is that many of these firms offer both employee and independent channels, making it easier to run your own independent practice when you decide that the time is right.
At many Regionals that offer both employee and independent channels, when you feel ready to monetize or go independent, you have the option to simply move from one channel to any other that the firm offers — making the transition much smarter and more seamless. In essence, you basically just “flip the switch,” and you are independent! You do not have to repaper your accounts. Your clients’ account numbers do not change. Your clients’ statements do not change. And your clients’ history goes with you. This makes things easier for you, and for your clients. You can focus on setting up your office, bringing on staff, and structuring your payouts, without having to deal with any of the hassles that go with transferring to a new broker dealer or custodian platform.
Deals, Payouts, and Risk
Ultimately, deciding on the right course of action for you will almost certainly involve choosing between the different deals that are out there, which vary significantly from channel to channel.
In the employee channel, Advisors are not going to get the same payout that they would in the independent channels, where the payout might be 90% or more. Instead, you are still going to get the employee payout, which is likely closer to 50%.
However, Advisors moving to an employee platform Regional or Super Regional are also going to receive an upfront amount for making the move — typically, about 100-180% of the revenue that the Advisor has done in the last 12 months. For instance, a million dollar producer might receive an upfront check at 150%, meaning that they will receive $1.5 million upon transferring to the Regional firm.
Broadly speaking, this amount functions like a forgivable upfront loan, where the debt is paid off by a commitment of time. Typically, this sum is forgiven when the Advisor spends 8-10 years at the firm; the Advisor can also simply opt to pay it off should they want to leave the firm or go independent earlier.
When an Advisor does decide to “flip the switch” and go independent after a period of time with their firm, their payout percentage is likely to increase as well — rising proportionately with the amount of risk that they take on. As the old saying goes, the more risk you take, the more money you make. The more you take on in terms of office expenses, P&L, and compliance, the higher your ceiling for payouts — but keep in mind that the less you are likely to see in terms of transition compensation upfront. For instance, an Advisor transitioning from a Wirehouse or Bank-Owned firm to a fully independent platform or RIA channel is likely to receive 0-60% of their annual revenue upfront, due to the fact that they can usually expect to earn a greater percentage in their monthly payout in perpetuity.
Want to Keep the Conversation Going?
All of us at Terrana Group welcome the opportunity to consult with you to determine the right platform for you going forward — one that satisfies your long term objectives and is also best for your clients!
Over the course of nearly 30 years, we have helped facilitate thousands of professional placements for Advisors, with client assets transferring exceeding $62 billion dollars. We have completed placements in most every major city throughout the United States, while building deep relationships with the advisory world’s most sophisticated and notable firms — including Wall Street brokerages as well as most Regionals, Boutiques, Banks, Independent Broker Dealers, and RIAs. We have a broad knowledge of the deals that are currently being offered and will ensure that you are being presented with the offer which will be best for you.
Confidentiality, professionalism, and respect are protocol to our practices and beliefs; we handle each and every step of the placement process with complete communication, keeping you informed while making the process smoother from beginning to end.
We are proud to always be considered as a great asset by our clients because of our proven expertise, many years of knowledge, and acute attention to detail. Financial Advisor Recruiting Services are not all created equal; we guarantee that the TG experience for clients and candidates is always world class.
We are based in Chicago, with a nationwide reach. Let us know you are interested by contacting us today. To get the conversation started, email info@terranagroup.com or give us a call at 312.655.8380 today.
