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Going Independent

Going Independent

Over the past several years the Advisory/Brokerage industry was distinguished between the “wire-house” and “independent” model.  Why are there 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 similar to “how many licks does it take to get to the center of a tootsie pop”.   Water will find its own level; the answer is idiosyncratic and embedded within each model.


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


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


The wire-house or the employee-based model may be perceived to have some drawbacks including lower revenue sharing or payout percentage, lack of personal branding, lack of control, supervision on your interaction with clients, 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 business owner).


The independent model is for the entrepreneur willing to accept a greater risk/reward scenario.  You shoulder more risk while enjoying more of the success, or at least that is the plan.  The independent model allows you to create your own vision, product and service offering, marketing & sales plan as well as succession plan. 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?
  • Regulatory Support?
  • Business and operations support?


This sounds like a lot, but don’t let yourself get 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.  Please feel free to reach out to us for a candid conversation.  Contact us today 603-965-7791.

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