I remember buying my first pair of shoes. I was four years old, and my dad brought me to the local shoe store. I remember the walls filled with shoes and the smell of new leather. As I sat down to be fitted for my new pair, the experienced salesman asked me, “what shoe would you like?”
Having a choice was something four-year-old me wasn’t accustomed to; mom and dad usually made my decisions for me. But now? Now I had control!
Sometimes we don’t really know we have a choice until someone asks, “So what do you want?” Ready for the analogy?! It was the same for me as a financial advisor. I started as an advisor in a major wirehouse (mom and dad in this example) and, early on, didn’t know I had a choice; I thought every financial advisor worked for a big company. It turns out there are a lot of choices. I write below about the choice I made and why I made it.
I picked Nike’s, by the way.
For years, the financial advisory industry has seen the growing trend of advisors opting for the independent channel. This advisory model, known as the RIA (Registered independent advisor) model, has been an opportunity for advisors to gain more control over their business in the way they advise and serve their clients. For myself, as an advisor who has transitioned from a large wirehouse, several factors played a role in making that decision.
Putting Clients First
As investor behavior changes, so do the way they seek advice. Investors want to know that their best interest is a primary focus for their advisors. As the market shifts to accommodate this need, the RIA model becomes more appealing for advisors looking to grow their practice than ever before.
Being held to a fiduciary standard favorably positions independent advisors for the rudimentary change the industry is currently undergoing. It is an industry filled with complexities and an abundance of products; deciding what is suitable for you is not always clear. With the open architecture design, RIAs can benefit from cutting-edge technology. This technology gives them the infrastructure and solutions they need to accommodate just about any client need.
The RIA marketplace has been a way for advisors to gain more flexibility to better serve their clients. Being able to tailor to individual investment and planning needs for each client is something that every advisor is after. This transition away from the traditional model of advice and will only accelerate the trend towards independent channels. It provides the resources needed for advisors as the industry shifts to become more planning-focused. Planning around client needs and goals is another way to develop a more personalized approach to investing. In turn, this will assist in creating relationships where both clients and advisors can thrive.
Starting the transition
The thought of transitioning a client base from a wirehouse to an RIA can seem like a daunting task. For myself and my clients, I saw the RIA model as an opportunity to do what I believe to be in my clients’ best interest while also strategically positioning my business for future growth. Although my business experienced a short-term setback, the opportunity to grow as an independent is unmatched with the resources available. In an industry that has become more commoditized over the last several decades, being able to create value for clients has never been so important.
As I continue this topic going about the emergence of independent advisors, I will go more in-depth on growth statistics and competitive forces within the industry.