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Benefits of Transitioning from a Small Broker-Dealer to a Super OSJ

Independence Without the Burden

08 Mar 2017
Independence Without the Burden

In recent years, more and more entrepreneurial advisors from wirehouses and captive insurance companies have been opting to go independent to gain greater flexibility in how they serve their clients. Now that the Department of Labor fiduciary rule has put potential conflicts of interest related to proprietary products in the spotlight, that trend is expected to continue.

Making the decision to leave even easier, many wirehouse and insurance-based advisors are discovering they don’t have to completely give up the structure they’ve become accustomed to. By joining an existing branch, they can enjoy the freedom of independence along with the support of experienced supervision, compliance and practice management professionals. 

But it isn’t just wirehouse advisors discovering the many upsides to joining a branch. Some independents, like Margie Swanson of Charlottesville, Va., have benefitted from it as well.

In 2003, Swanson started out as an independent advisor in a solo office with her broker-dealer. But in 2011, she chose to become an independent advisor under branch manager Jack Connealy with JFC Financial in Lincoln, Neb. 

“I joined Jack’s branch so I would feel as though my voice was magnified,” Swanson said. “Being part of an organization with some clout in the industry has helped me get more done. The branch is tremendously supportive and a great group of individuals to network and share expertise with.”

By moving to an established branch, independent advisors like Swanson also reduce overhead costs including rent, staffing and training and gain valuable networking, support and service from other advisors and staff. 

“Branch models definitely benefit everyone, even when each advisor has a different business model,” said Todd Terhorst, branch manager for Diversified Wealth in St. Louis Park, Minn. “Advisors can share their unique business styles and product knowledge and receive feedback on their choices. There are common support systems in place including staff, software and systems. I don’t know too many people in this business who are really a one-person shop. There’s value in being part of a group while still being a maverick and doing your own thing.”

 


Branches can provide a balance of FLEXIBILITY and SUPPORT.

 

Two Layers of Service

Advisors in branch offices benefit from the added security of being backed by two levels of service and support — one from the branch and another from the broker-dealer.

“When you join an existing branch office, you get the best of both worlds,” said Gregg Johnson, Securities America’s executive vice president of Branch Office Development and acquisition. “You have the values of independence in strategy and in product choice, the support of an experienced branch and successful peers and the extensive resources offered by the broker-dealer.”

Branches provide administrative services, supervision oversight and best practice solutions to their advisors. In addition, branch managers often work closely with skilled professionals at the broker-dealer level so they can pass on information about new products, technology and training.

Size and scale are important when deciding on the perfect branch and its broker-dealer counterpart. It’s important to partner with a firm that is large enough to provide leading products, services and technology, but small enough to give personalized support and maintenance.

To get the most support from joining an existing branch office, look for one with top producers and a professional, non-producing management team with the responsibility of running the day-to-day business and supporting advisors. This model couples the benefits of peer-level mentoring and coaching with experienced business management.

 

Build Brand Prestige

In the independent environment, advisors rely on their unique brand to attract and retain clients. Moving from a solo practice to a branch office can help reinforce your brand, when marketed as a new partnership, or build your brand into the existing branch, adding credibility to the advisor as being trustworthy and collaborative.

“It’s a common misconception that it is difficult to grow a business without a major brand backing you up,” Johnson said. “The fact is, most clients don’t care about a known-brand parent company. They are looking for a knowledgeable financial advisor with whom they can build a long-term relationship based on trust. Independent advisors are able to further that relationship by putting their clients’ need before their broker-dealer’s needs.”

 

The Flexibility to Choose

Independent advisors can structure their work lifestyle to complement rather than overpower their personal lifestyle. They have the flexibility to choose the type of people and support staff with whom they want to work and can structure their office hours and work days to accommodate their needs and the needs of their clients.

Most successful branch offices allow advisors seeking greater independence with maximum flexibility the opportunity to create a personalized business model that works best for them and their clients. 

For instance, at Cooper McManus in Irvine, Calif., advisors can choose to run their business on a platform that provides a 60 percent payout and help with rent and administrative costs or a more independent platform with a 90 percent payout that leaves them to cover their own expenses.

“Either way, when you factor in that wirehouse payouts have dropped significantly over the years, and they no longer carry the caché they once did, joining an independent branch office is an attractive option on many levels,” said Arthur Cooper, co-founder of Cooper McManus, in Irvine, Calif.

 

Built-In Succession and Continuity Planning

Many advisors, including solo advisors, struggle to find the right successor for their business after running it for years on their own. Advisors who join a branch often build relationships with other advisors they may eventually feel comfortable transferring their business to. And clients see the strength of continuity as a back-up plan in case their advisor should be away or something unexpected happens.

Grier Laughlin began Quintus Financial Services in Englewood, Colo., in 2008 as an independent advisor under branch manager Jack Connealy with JFC Financial. After receiving branch manager training, Laughlin began to build his own branch, expanding Quintus Financial to include three other advisors. In February 2011, Laughlin was killed in a tragic car accident, leaving his family, the community and the firm devastated. 

By expanding from a solo office to a team model, Laughlin’s partners – with support from JFC Financial and Securities America’s Practice Management team – were able to carry on the business, taking care of his clients and helping secure his legacy for his family.

Choosing to be an independent financial advisor means you can supply your clients with optimum product selection and a vast array of services. It also means taking on more responsibility. But as advisors opting to join a branch are discovering, you don’t have to do it all yourself. With the support of a team at an established branch office, you can tap into resources and benefits you might not have had otherwise.

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