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What Do I Need To Know- Going Independent



Over the past several years the Advisory/Brokerage industry was primarily divided between the “wire-house” and “independent” models.  Why different models and are there advantages to one over the other? Are there greater benefits for the clients, firm or advisor?  The answer to that question is idiosyncratic and embedded within each model.


Both models work very successfully, as demonstrated by wire-house firms like UBS and Merrill Lynch and independent firms like LPL and AIG.  There are also many small Broker-Dealer and Registered Investment Advisor firms that have similar models.  One significant difference between these two models is W-2 vs. 1099 treatment of taxable income.


The wire-house model is employee (W-2) based, enabling the Advisor with an office, marketable brand, sales support, administrative and operations support, training, employee benefits and all the investment management tools one could imagine…not bad! This very competitive industry is a good place to start and depending upon how your practice matures, may not be a bad place to retire. So why do independent firms exist?


The wire-house (employee-based) model may be perceived as having some drawbacks including lower revenue sharing or payout percentage, lack of personal branding, decision-making on which products and services are offered to clients, client ownership (not owning your book), creating value in the firm’s brand, and limited succession planning for you as the practice owner (not a business owner).


The independent model is for the entrepreneur willing to accept a greater risk/reward.  You shoulder more risk while enjoying more of the success, or at least that’s the plan.  The independent model allows you to build value beyond a salary and commission. Supported by your own vision, product and service offering, marketing & sales efforts as well as succession plan, the upside belongs to you. All the revenue and costs are on your P&L Statement which allows you to exercise your financial management skills.  Depending upon your business plan and personality profile, you may find it more rewarding operating your own firm rather than being employed by another.  Again, there is no right or wrong answer here, it is all about YOU!


You’re reading on…great! So what is “Going Independent” all about? What do you need to know?  Here are few items to get you thinking:

  • Are you risk averse? If so, stop here. No need to go further.
  • What are your skills?
  • Have you formalized your vision
    • What is my market differentiator– what distinguishes me from my competitors
  • Are you going to register as an RIA, Broker-Dealer or both?
    • Register an RIA
    • Affiliate with a BD
  • Have you developed a time line?
    • Registrations, marketing, client transition/acquisition
    • How much money do I need before I start making it?
  • What will be my technology platform?
    • Investment Management
  • Personal Financial Planning
    • Business Planning
    • CRM
    • E-Mail
    • Web-Site
  • Who will I choose for a custodian – Fidelity, TD Ameritrade, Schwab, others?
  • Compliance Support?
  • Business and operations support – your middle and back office infrastructure?
  • Although a number of issues, don’t let yourself feel overwhelmed. If it were easy everyone would be independent! Take it one step at a time. There is help out there, but make sure you search for the firm that can provide the most assistance and with whom you can work.

    RegMaven would be pleased to have a conversation with you about getting your own firm launched. Our expertise along with our partners will allow you to build the firm you want without the stress of “pulling it all together”. Please feel free to reach out to us for a candid conversation. Contact us today 603-965-7791 or click here to contact RegMaven.

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