The Case for Leaving a Broker-Dealer

Published September 1, 2021

Breaking away from a broker-dealer is never an easy decision, but the momentum towards independence is accelerating, as more advisors than ever consider the move. There is nothing quite as rewarding as building and owning your own truly independent practice.

There are a lot of factors that can push an advisor at a broker-dealer to leave and start an RIA. For example, an advisor may feel that compliance oversight in the broker-dealer structure is overly burdensome. A lack of flexibility in the operation of their practice may be unattractive because it limits the full range of solutions they can offer their clients. And it goes without saying that the lure of better economic payouts is also a significant draw to the independent RIA market.

However, the biggest motivator for breaking away and launching an RIA may be an entrepreneurial desire to build a business and a valuable asset. Many advisors have made the bold move to launch successful RIAs and studies show the vast majority find it to be a rewarding career improvement.

According to the 2020 TD Ameritrade Break Away to Independence Survey1, those advisors who made a move to the independent RIA channel report a better life:

  •       80% said that quality of life is better
  •       75% said the transition was easier than expected
  •       70% said separating from their employer’s brand helped their bottom line
  •       72% said technology is better than expected

Now let’s look into some of the major reasons financial advisors contemplate a breakaway in the first place.

Compliance oversight is burdensome

The regulatory burden of working at a broker-dealer has risen to an untenable level for many advisors. In general, broker-dealers are notoriously conservative in their oversight, which can put a tremendous strain on a financial advisor. As regulatory obligations across the financial services spectrum become more and more onerous, some advisors struggle to find the time needed to address the tedium of daily documentation and annual filing and audits. Going independent can mean leveraging a compliance consultant and/or outsourcing some of those tasks to a Turnkey Asset Management Platform (TAMP) like GeoWealth.

Lack of flexibility in the operation limits investment offering

Financial advisors put their clients’ needs above all else, but are often limited by the investment options available at their current broker-dealer. This can profoundly impact the relationship between the advisor and their clients and be a source of frustration by hindering the ability to offer clients the breadth and depth of investments they may want to hold in their portfolios.

Independent advisors are less restrained in offering clients the exact solutions they require when they require them. That can include outsourcing their investment management to a trusted partner, like a TAMP like GeoWealth, so they can focus on what they do best – working directly with their clients.

Better economic payouts lay on the horizon

Obviously, breaking away from a broker-dealer brings with it the potential for better financial terms for advisors. Instead of selling their clients commissionable products that may not meet their needs, they become fee-based advisors paid for the services they provide, which can be quite advantageous.

Working as a truly independent advisor, the cost of doing business can be lower, and those lower costs can easily be passed through to clients, thus building even stronger relationships. Instead of a salesperson, the advisor becomes a true fiduciary.

Entrepreneurial spirits want to build a business and valuable asset

Most financial advisors want to do business THEIR way. It’s the entrepreneurial drive that inspires so many advisors to become advisors in the first place. But often, their association with a broker-dealer limits the actual value of their enterprise. Becoming independent gives the advisor the ideal opportunity to build their business to their own exacting standards.

The potential to offer existing clients lower fees, better service, and better technology can also attract new clients, thus growing their practice in a way not possible with a broker-dealer affiliation.

Never been a better time to make a change

If you’re considering starting your own RIA and leaving your broker-dealer, you should to contact GeoWealth today. We are one of America’s leading TAMPs2, and our large, innovative development team is continuously improving our platform and tech tools.

We offer a dedicated relationship manager to each client and believe in high-touch service. Plus, you’ll know everyone at GeoWealth, and everyone at GeoWealth will know you and your practice.

If you haven’t already, download your copy of our new “Breaking Away the Right Way” guide, which walks you through the steps necessary to become an independent RIA. Or call us, and a GeoWealth team member will be happy to answer any questions you might have.

 


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  1. https://www.tdainstitutional.com/content/dam/institutional/surveys/2020/breakaway-broker-sentiment-survey-2020.pdf
  2. https://lp.thewealthadvisor.com/TAMP2021_LP.html