Every new era in the financial advice profession brings changes that affect how advisors run their businesses and serve their clients. Even the answers to familiar and fundamental questions have become moving targets, given the profound upheaval we've seen in our lives and our world over the last two years.
One of the questions our industry should continually reexamine is, "How can we help advisors make the transition to independence as smooth as possible?" Today, it's clear that best practices that may have applied five or even two years ago are no longer state-of-the-art.
As we have helped advisors join the independent channel throughout this unpredictable time, we've learned that three key lessons have become more important than ever in ensuring a smooth and successful transition:
1. Going independent is a long-term decision. Don't do it for short-term reasons.
Motivations matter when building an independent advisory business. One of the biggest pitfalls I see happens when advisors go independent because they're running from a bad situation, rather than making a plan and moving thoughtfully toward something more positive.
If an advisor is moving because he or she can't stay in their current situation any longer, they may not be considering all the potential angles.
On the flip side, many advisors at wirehouses and regional firms find themselves thinking about independence thanks to the ongoing M&A "gold rush" in which strong and growing independent firms are being snapped up by RIA aggregators and others, in deals often fueled by private equity money.
This is certainly a more "positive" reason to move — but it's still short-term thinking. Does your long-term vision align with the long-term vision of the firm you are joining?
Advisors who jump to independence prematurely or in haste are more likely to overlook critical questions like, "Does my new strategic partner have a transition team that has helped move billions of dollars in client assets to a new platform? Do they offer flexible affiliation and real estate solutions that fit my business? Can they help me role-play client transition conversations — and will they take the time to do it?"
These advisors also may underestimate critical factors that will determine their long-term success, like whether the new firm offers turnkey marketing resources that fit with the practice's client acquisition model; the depth of the strategic partner's technology and practice management offerings; and the new organization's service culture.
2. Clients aren't scared of transitions anymore — as long as they're handled correctly.
It's a well-known fact that the pandemic has changed client behavior. What we are seeing, however, is that these changes are building on each other, resulting in evolution that's occurring at a faster rate than we would ever have anticipated.
