Experienced financial advisors have a lot of options when it comes to shedding the restrictions and limitations of the wirehouse work environment. From regionals to hybrids to an RIA model, advisors have never had more options for breaking free of the wirehouse and going independent. Advisors who want to transition from the wirehouse to an independent broker-dealer have a lot of options, from large operations with thousands of employees to small boutiques. Learn more about what you need to know about making the leap from a wirehouse to an independent broker-dealer
What Is An Independent Broker-Dealer?
A broker-dealer is an individual or firm that is engaged in the purchase and sale of securities for its own account or on behalf of clients. The name itself is a hybrid, describing the two major functions of such a firm — when the firm is buying or selling for a client, it is acting as a securities “broker” or agent, and when it acts as a principal, trading securities on its own behalf, it is acting as a “dealer.” For investors or traders to participate in the stock market, they have to open an account with a broker. Broker-dealers also provide advice to customers, publish investment research, sell investment products other than securities, and raise capital for companies.
Registered representatives who carry a Series 6 or 7 license are required by law to register with a broker-dealer in order to act as a dealer selling securities products to the public. However, these broker-dealers can vary widely in the way they operate. While wirehouses generally exercise a great deal of control over their employees, dictating the products they can sell and the types of business they can pursue, independent broker-dealers usually allow for a great deal more freedom. Independent broker-dealers also offer a wide variety of models for those broker-dealers who are looking for independence, from a strictly independent model to an employee model that allows broker-dealers to own their own practice while still taking advantage of the benefits of being a W-2 employee.
The Advantages Of Independence
As an independent broker-dealer, you’re able to own your own business, meaning you can select who you want to work with and how best to serve their needs. Instead of onerous sales quotas, you’re able to recommend only products that truly serve your clients’ best interests, allowing you true freedom in the work you do. Independent broker-dealers also design their own business models, controlling their own brand, marketing, and outreach to prospective clients, and focusing on the most rewarding aspects of their business while choosing what to outsource. The ability to outsource compliance, administration, research, and accounting functions can ensure that you have more time to do what’s important to you — building and servicing your existing book of business.
Independent broker-dealers are also able to reap more of the financial rewards of owning their own business, retaining a higher percentage of what they bring in, and controlling the eventual sale and transition of their practice. Independent broker-dealers can earn more on the same book of business than their peers at investment firms simply by bypassing commission policies and broker fees. Depending on the model you choose, you’ll be able to determine how much support you need and the best way to structure your practice to maximize your earning potential and work-life balance.
Many wirehouse advisors and broker-dealers are reluctant to consider independence. After all, for a long time, the independent model didn’t necessarily offer the technological sophistication, research, and brand recognition that are built into a wirehouse practice. Many advisors were willing to put up with the significant disadvantages of working with a wirehouse, including minimums that limit broker-dealers’ ability to grow their business, as well as the tendency of the wirehouse to manage to the “least common denominator,” a strategy that leaves many broker-dealers and advisors feeling restricted and unable to properly serve their clients. However, advances in technology and integrated solutions that allow independent advisors and broker-dealers to manage their own practice without sacrificing support, research quality, or capability allow broker-dealers to retain all of the advantages of the wirehouse model with none of the drawbacks.
Dual-Registration And The Hybrid Model
Many broker-dealers who choose an independent model elect to develop a hybrid practice, in which they act both as an independent fee-only investment advisor and as a commission-based broker-dealer. The flexibility of this dual registration model allows independent advisors to pursue opportunities in a changing marketplace, especially as fee-based advising grows in popularity.
What Else Do I Need To Think About As I Consider An Independent Broker-Dealer?
As you’re evaluating your options, understanding your employment agreements, and whether your firm participates in the Broker Protocol will also help you understand what your options are as you plan your move. It’s also important to consider the transition services offered by different independent broker-dealer firms. In many cases, you’ll be able to find a firm that will ensure that your clients’ transitions to your new practice are handled with the utmost care. Talking to a professional can help. At Terrana Group, we’ve got decades of experience with independent broker-dealers, RIAs, and more — we can make sure you’re asking all the right questions, and getting answers that will serve you well.
Want to Keep the Conversation Going?
Going independent is more complicated than ever, and the right partner can make all the difference. At Terrana Group, our experienced and knowledgeable professionals 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 transferred exceeding $67 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 major Wall Street brokerages, most Regionals, Boutiques, Banks, Independent Broker Dealers, RIAs and Custodians. 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 essential 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.
