By: Abby Salameh, Chief Marketing Officer and Charlie Latimer, Director of National Recruiting
Published November 2, 2016
One of the greatest advantages of the independent, fee-based advisory model is the freedom it affords both advisors and their clients. In the independent model, advisors own the end client relationships, and they are also able to more easily merge with other advisors and create their own customized succession plans. Clients, of course, enjoy the highest standard of care: the fiduciary standard. In the third of our four-part series (see part one and two) we focus on factors to consider when weighing the case for joining an RIA. Let’s look at freedom in all its forms and how industry-leading RIAs can help increase the value of your independence.
PART 3: Free to Be You and Me
Custodial Open Architecture
What if you have different clients who have very different needs from a custodial standpoint? Do you have to lump everyone into Schwab or can you access multiple custodians for multiple scenarios in the best interests of those clients? Financial advisors with that kind of access have the benefit of directing assets to the custodian that makes sense. Open architecture should be a requirement of yours versus being forced to pigeonhole your client accounts at a single custodian with no outside options. Your business does not have to be in a box.
Succession Planning Options
One of the joys of being an independent advisor is that you have full control over how you dispose of your life’s work when you are ready. Indeed, plan or no plan, unforeseen circumstances can and do occur all the time. A possible solution is to execute a buy-sell agreement with another advisor who may very well be working under the RIA you are joining. But what happens when your personal “black swan” event occurs, leaving you fully incapacitated? Or even worse, you suffer an untimely death? How will your family be taken care of if you have no succession plan? Some RIA firms will literally buy your practice at a pre-negotiated price, bear all the risk of managing and retaining your clients and honor a death benefit to your heirs. These arrangements are somewhat uncommon, but do exist. You need to ask!
Ability to Use Your Own DBA
Not feeling like you want to assimilate into the name of the RIA you’re joining because you have spent the last number of years building your own brand in your local area? You don’t have to. A few RIAs out there will allow you to keep your LLC name as a DBA and simply affiliate as an IAR of their RIA. So essentially, you will be hanging your own shingle, but the ADV you show your clients will be from the roll-up firm. Isn’t it a good thing to show that you’re part of a $10B RIA, leveraging their resources, scalability, buying power and support to better serve your clients?
Freedom to Easily Separate without Penalty
Project a few years out: After working with this RIA for two years, you find yourself with buyer’s remorse. Or perhaps your needs have changed. How easy will it be for you to sever your relationship? Ideally, it should be a single piece of paper your clients have to sign like a TOA or positive consent letter that enables you to move freely to another entity, or even to your own. Firms do a great job telling you how great they are when courting you, but you need to find out how easy it is to leave if things change for you. Read the fine print and get it in writing. Firms that have an open “back door” have to demonstrate their value every day, knowing that you can “fire” them at will.
Stay tuned for the concluding Part 4: Icing on the Cake, coming next Wednesday