What to expect if your financial advisor decides to become a solo practitioner
After a decade of working as a consultant for large corporations, Ashley Foster has asked for a career reset. So he decided to go solo. Foster, 35, has joined many of his peers, letting the financial services giants start their own independent practice. Eager to test their entrepreneurial skills, they face a myriad of challenges, ranging from convincing clients to follow them to finding a workspace to dealing with regulatory compliance issues.
“I was fed up with the mad race for quotas and sales,” said Foster, a Houston-based certified financial planner. “And when you’re part of a very large national brokerage, you’re in a box” with little freedom to personalize your marketing or use social media to gain visibility and control your message and brand identity.
More than 800 advisers fled from wire houses or brokers to join RIAs over the past five years, according to Financial Planning magazine. Many of them face emotional and financial hurdles as they seek to reconfigure their business model, recoup their start-up costs, and put in place internal processes to support their new operation.
Thinking back to his first year of independence, Foster credits a few early moves for helping him get started. In his old business, he earned a commission on investment or insurance products that he sold to several of his pre-retired clients. Now he wanted to create a paid practice for a younger clientele, so he sold almost all of his business volume to another advisor and started over with a target market of individuals and families in their 30s.
“My ideal client profile is a 34-year-old woman, married with a child or child on the way, with a family income of $ 150,000,” he said. Rather than offering products based on commissions, Foster charges customers an upfront fee ($ 1,500 to $ 6,000) plus a monthly retainer ($ 200 to $ 600).
“I wanted to provide comprehensive financial planning services in a way they could afford,” said Foster. Because millennials are used to a monthly subscription model, he figured they would adopt his pricing structure. He has signed on 14 homes so far.
Like other independent advisers, Foster stresses the importance of formulating a clear vision for yourself for the first two years. As part of your planning process, he suggests addressing questions such as:
• Who will you be working with?
• What value will you bring to customers?
• What will you charge?
Knowing that his income would suffer initially, Foster built up a nest egg before leaving his old business. He also joined the XY Planning Network, a membership organization that provides technology and compliance support and other benefits to independent advisors. Once he left, he saved money on rent by negotiating favorable terms at a WeWork shared office site in his area.
While Foster has sold most of its business volume, other advisors who are considering becoming independent are investing significant time and attention in communicating with clients during the transition. The goal is to reduce confusion and fear so clients understand what’s going on and what they stand to gain from staying with their longtime wealth manager.
Less than two weeks after Charles Adi left his employer to open his own practice in 2017, the chartered financial planner called his 80 clients to brief them on the situation. Because he had set up his own customer relationship management (CRM) platform three years earlier, separate from the one used by his employer, he had access to his clients’ contact information and accounts.
“I walked by so that customers first heard from me that I was gone,” Adi said. “I wanted to be their point of contact. I told them I had all of their account information and was monitoring their accounts during the transition which gave them reassurance.
Assure them of his intention to remain with the company as an independent advisor – and give them an idea of how long it would take (in his case, two months) to complete the registration process and open his new practice – helped solidify his bond with them.
Often, advisors are limited in the amount of customer data they can take when they leave a large company. So-called “protocol” agreements between financial companies are commonplace; they impose strict rules on what information outgoing advisers can keep.
“Once you’ve made the decision to leave, you want to be as close to your customers as ever. ”
In the months leading up to Rob Carrigg Jr.’s departure from a large corporation to join Steward Partners Global Advisory, an independent partnership, he laid the groundwork by checking in with his clients. Although he wasn’t able to tell them about his upcoming plans, he found that just reaching out and keeping in touch proved to be invaluable.
“Once you’ve made the decision to leave, you want to be as close as ever to your customers and sort out as many service issues as possible,” said Carrigg, a certified financial planner in Portsmouth, New Hampshire. It creates some awkwardness when you can’t mention you’re going to be moving. But after you’ve moved, you can explain why – that it would have been a breach of a contractual obligation with your old business – and they’ll understand.
Like Adi, Carrigg made discussions with clients a priority immediately after his departure. With the MoUs in place, he could only keep a few basic information about each client. He prepared for each call by reflecting on each client’s unique situation and anticipating their questions and concerns.
“When you leave, a clock starts ticking,” Carrigg said. “You want to spend as much time as possible contacting your customers. It was the biggest decision of my life. My wheels were spinning 24/7 on how to make this work.
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