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Contemplating Independence? Get Back to Basics

By Walecia Konrad March 10, 2017

Whether you come from an RIA or broker-dealer background, starting your own practice is both exciting and challenging. You’ll find you need to be an expert in all the support services you may have taken for granted when you worked for a larger firm, such as compliance, technology and marketing. Meanwhile, you’ll still need to provide the best investment and financial planning services for your clients. That may sound daunting, but it hasn’t stopped plenty of advisors from flying solo in recent years.

Many advisors team up with other advisors with complementary specialties to build a firm from scratch. Others look to a growing number of support companies that specialize in providing tech, administrative, compliance and other services to independent advisors in return for a percentage of the business.

Integrated Advisors Network, in Palo Verdes Estates, Calif., is one such business. Jeff Groves, Integrated’s CEO, points to compliance as one of the biggest hurdles newly independent advisors must face.

“Most advisors don’t have a compliance background — maybe they had a class or two in business school,” he says. “It’s not an intuitive subject but it’s very costly to ignore. Five years ago many small advisors just didn’t worry about it,” but now, he says, “everyone knows they have to pay attention to compliance.”

Groves suggests advisors look for compliance systems that strike a balance between regulatory risk and a reasonable allocation of human and financial resources. Remember, he says, compliance is vital but it’s also meant to support the interests of your firm, not the other way around. Setting up compliance from the very beginning can help make sure the systems fit in with your business model.

Where’s my tech support?

Life without technical support can feel like a burden. Not only do you need your computers to work but you also need the latest tech applications to help you administer, balance, trade and manage portfolios. And then there is the tech that helps you handle and enhance customer relationship management and customer data, not to mention a myriad of other financial planning tools available.

“You can’t go to clients and say ‘Hey, I’m starting my own firm,’ without having good technology in place,” says Clark Richard, who started San Diego-based Vineyard Wealth Advisors last July and now has $200 million under management. “Clients will notice if your tech is lacking and they’ll worry you can’t handle the business on your own.”

Again, support companies can provide advisors with help in this area; so too can a good custodian or custodian tech system. Richard’s firm favors a growth model that involves adding new advisors through acquisition. They use a custodial tech system that allows access to many different custodial platforms rather than requiring conformity. “When new advisors join our firm, they can usually stick with the custodians they are familiar with, making the transition that much smoother,” he explains.

Marketing equals communication

Marketing is the way you add clients and build your assets under management, says Stephen Luz, managing principal at Intrinsic Mutual Advisors in New York City. Luz, who until December 2016, managed $160 million in assets for JPMorgan Chase, went solo in January.

Communication with clients is key, says Luz. “Relationships are why your clients will come to you when you go independent,” he says. “From the time the client lays eyes on your name you have a serious obligation to be truthful and transparent.” Luz enlists the help of a marketing firm that offers a cloud-based practice management tool to store, retrieve and make good use of client information. “It’s what we need to have an effective marketing campaign,” he says. Luz says he’s also looking at creating an online newsletter and other ways to create and maintain visibility so former and new clients can easily find him.