Category: Practice Management

Transcription of Video

This is Ned Van Riper with Independent Financial Partners and I am speaking to you from our corporate office in Tampa. I wanted to shoot a quick message about office space because office space is often times a very overwhelming and daunting part of the conversation. It’s typically the most fun part of the conversation, but for breakaway advisors that are considering establishing their own practice for the first time, it can be pretty overwhelming – they’re not really sure where to start.

As an independent advisor, there’s a lot of flexibility and options around office space and I just wanted to tell you about a few of them.

Renting or Buying Office Space

We have many advisors across the country that rent office space. Many advisors actually purchase their own building and build out office space for the first time. That’s certainly dependent upon what part of the country you live in. An executive suite, something like a Regis, is a great, low-cost solution. I tell advisors it’s a really nice short-term solution. Some advisors are there full-time. But an executive suite can give you not only an office, but an administrative assistant to help with the phones in addition to a very nice conference room to meet clients in.

Home Office

Other advisors actually work from a home office and I know for wirehouse advisors that can seem like a crazy choice, but we have many successful advisors that work from home and quite frankly wouldn’t have it any other way. It’s the lowest cost, it’s very convenient, and some advisors even meet clients in their home office if they can accommodate them. So, it’s certainly not for everybody, but not something to be overlooked as well.

Consider Cost

Also, you know, as an independent advisor, keep in mind that you’re a business owner, so often times the cost for office space is one of the largest costs you’re going to have. So, be smart about office space. For a solo advisor, you don’t need to have more than 800 square feet or so. For a small team with staff and other advisors, 1,500 to 2,000 square feet can be an ample amount of room for your team, but you have to make smart decisions because this is your largest cost.


From a technology perspective, you know, the good thing is that in these days you need more than really good Wi-Fi, a land line, a laptop, and a cell phone. You can run your practice from no matter where you are from one of these devices and it’s low cost and it’s simple. So, you don’t need to have a server room in your office. You just need to have really good Wi-Fi and, again, a phone and a laptop.

Final Thoughts

To wrap up, make smart decisions about your office. Lean on your firm. Here at IFP, we have advisors here in Tampa and in Phoenix that use our office for their full-time office. How great is that? They’ve got beautiful office space, they’ve got staff, they’ve got conference rooms they can use any time. So, lean on your firm because they’ve got the resources to help you identify and find office space.

Video Transcription

Hi. My name is Ned Van Riper. I’m the Director of Advisor Recruiting with Independent Financial Partners. We’re an SEC registered RIA, and as the breakaway advisor movement continues to gain traction, I wanted to talk about the term independence, perhaps squash a few misperceptions about what independence is and is not.

Independent But Not Alone

Breakaway advisors, captive advisors, they hear the term independence, and they think that they are going to be alone or they think they’re going to be without support and service. Who do they turn to for the normal questions they have on a daily basis? And they’re so used to their current branch environment that they had their branch manager compliance team, ops team, right down the hallway. They can turn to questions and answers at any given time. And they’re surrounded by a dozen or more advisors they can bounce ideas off at any given time.

As a former wirehouse advisor myself for several years, I would make the argument that there’s more support and more service within the independent space, especially if you’re partnered with the right firm. What independence is is control and it’s ownership. And yes, economics are stronger, too. But advisors break away to form their own business that they have the ownership of. They control the branding and they control the message and the value they provide to their clients. And they’re not told how they do it. It’s how they want to do it.

Concierge Service for Clients

The ability to serve the clients really resonates with advisors because that’s a different model than what they’ve been used to on the captive side. There’s no firm requirements, and again, they have, with the right firm, more support, more service, and more specialists that they can pick the brain of and get support and help from all day long.

I hope that gives a little insight into what independence is and is not, and I appreciate you watching.

If you have been in the industry long enough, you’ve heard horror stories about advisors changing firms or breaking away, only to lose a majority of their clients. This story is the same across numerous channels, including wirehouse, independent, and insurance-based or bank broker-dealer-affiliated advisors. These stories are sometimes fabricated by branch managers to scare everyone straight (I am thinking of my former wirehouse!) and sometimes they are true.

Exploring the Truths

Let’s start by exploring the cases that are true. It’s typically obvious why this happens. An advisor is not happy with their practice’s growth and often is pressured by their firm to produce more. They may react by moving to a new firm that has a polished recruiting strategy that seems far more attractive. However, the advisor has never been proactive and plateaued early on in their career.

They got here by not building or adopting a system to more efficiently manage their clients and practice. Clients were never segmented and called or asked to meet on a monthly, quarterly, or annual basis. These clients typically were the ones initiating the conversation, which often put the advisor on their back foot. Without an established relationship, the inevitable death spiral will occur when switching firms.

Why does this happen?

Clients choose to work with the advisor, not with the firm that he or she is affiliated with. Wirehouse advisors: you know it’s true. Every individual is compelled to look out for number one and, should they receive poor service, they will make a change. So, when advisors make the change for a ‘new beginning’ or ‘upgraded platform’, clients exit stage left.

A Cautionary Tale

When consulting with advisors during a transition we always ask, “What does your client service model look like?” We tell them that they don’t need to answer the question to anyone but themselves, but the answer will affect client retention. There are other factors that impact client retention during a transition, but there is no other single factor that has a more profound negative or positive effect than how an advisor services their clients. Period.

We recently counseled an advisor who was moving and one week prior to the transition date, he asked me if it would be okay for him to speak with his compliance officer. According to the advisor, this individual was trusted and held in very high regard. He thought the compliance officer could make his outgoing departure smooth. For the record, we strongly advised him not to share this information and in the end against his better judgment, he told his secret. Luckily for him, this particular incident only resulted in one lost pay period of fees and commissions, but it’s still not an easy pill to swallow. However, it could have been much worse. Outside of your spouse/partner and attorney (and new firm!) never tell anyone about your move, as it could result in immediate termination.

Retention Rates Remain High

The majority of advisors do subscribe to tremendously effective service models and we often see client or asset retention as high as 85% or higher. This retention begins years before an advisor is even thinking of changing firms, as the advisor’s business practices help cater to clients for life. They become a trusted financial consultant and occasional poor investment performance results don’t cast a shadow on the relationship. Having taken my own book of business through a firm change, and then helping dozens of advisors and teams make a move, we consistently see client retention between 70% and 90% or higher. More often than not, the lower retention rate is by design as they shed clients they don’t want.

A Tale of Success

One of my favorite stories, told so much more eloquently than I can, comes from an advisor in Ohio. He left a wirehouse to affiliate with an independent broker/dealer. Let’s call him John. So, John segmented his book A through D, as so many advisors do. Upon resigning, his ‘A’ clients received nothing short of white glove service to ensure retention. The ‘B’ group received very close to the same level of attention, as they were also very important to his business. John mailed one letter to his ‘C’ clients and if they did not respond to the letter, he let them go. His ‘D’ clients (the ones he definitely didn’t want) were never notified of his move! The day after he moved firms, John said he was more profitable than ever and, more importantly, he was now running a highly efficient practice.

Final Thoughts

At the end of the day, Advisors should focus on a better experience for their clients and the retention will follow. As long as you are maintaining a close relationship with them, clients will be loyal to you, rather than the firm you are affiliated with. Whether you stay with your current firm or not, client happiness is the core metric that dictates an advisor’s success or failure. Never forget that.

1. A Misaligned Business Model:

Advisors serve client niches and don’t try to be all things to all clients, as do firms. More and more Financial Advisors are serving client niches and finding a great deal of success in being a specialist to their clients. Some Advisors cater to small business owners setting up for a liquidity event, while others serve neurosurgeons and not physicians as a whole. The advanced planning a neurosurgeon requires is different than that of a college professor.

Many firms are also going after a specific segment of the Advisor population and have created elaborate infrastructure to provide the highest level of support. This support is necessary to not only provide the means for the Advisor to run an efficient practice, but to be able to spend more time growing their niche, and less on the minutia of running the business. For example, Advisory teams should seek a multi-custodial RIA, Retirement-Plan Advisors should have access to an ERISA attorney and bond traders should have access to a capable desk.

If a firm is currently serving Advisors with similar client needs, business mix, and practice size, they could potentially be a good fit. Additionally, have they transitioned other Advisor teams from your current firm successfully, and do they have the tools and human capital in place to help you get to the next level? After all, you are making the change because you feel that you have outgrown your current firm, probably for a few different reasons. This alone warrants the effort in identifying a firm whose team who has been in your shoes before.

2. The Smoke and Mirrors Behind Payout and Transition Capital:

The economics of making a change are an extremely important part of the conversation and factor in your ultimate decision, but there is more to the story. Payout is far more important than “up front money” in the long-term relationship between an Advisor and his/her firm and really, they shouldn’t be in the same conversation. Understand variable and fixed costs that will be part of the equation, in addition to trading and platform fees, and add-on costs for items that otherwise may be included elsewhere.

Transition capital can be beneficial as income replacement while you are moving clients, especially during the first 30-60 days. Understand the parameters of receiving this capital, which is usually in the form of a note. Revenue or asset retention targets may also play into receiving the full amount. If this is the case, it means 100% of your capital will not be delivered up front.

If you are currently under contract you may be on the hook to your current firm if you leave them. Know what you are walking into and equally important, away from. The proper legal and/or compliance resources and experts exist to provide this critical guidance.

3. Is the recruiter paying you lip service or does that steak have some meat?

Any firm that you speak with will tell you they are service driven and have industry leading technology. Dig in deeper to understand the service model so when you or your staff has questions, or need trouble shooting you will receive the correct answer on the first try. Basic needs like knowing how to access client-account paperwork or more sophisticated needs such as who to contact to evaluate your top client’s advanced planning needs, are essential.

An important conversation Advisors breaking away from a wirehouse or regional firm must have is office space. Access to expertise in this field will guide you through the identification, negotiation and build-out of your new office. If a build out is involved, you want experience on your side. If a firm is large enough, there may be an existing Advisor or team within your area that has available office space.

If the firm’s dedicated technology team isn’t properly credentialed or funded, the tech needs will not keep pace with your business. Or worse, do they not even have a dedicated tech team? If you do not have full access to a wealth management team who can provide sound strategy and guidance to assist in your own portfolio management or provide turnkey model portfolios on your behalf, you are not leveraging resources that should be in place. Ask if the firm will provide complete financial planning services, and if so, are those preparing the deliverable, CFP’s®?

Avoiding these 3 top land mines will help you successfully transition your practice. Being aligned with a firm more closely interested in partnering with you will help ensure long-term success.

Securities offered through IFP Securities, LLC member FINRA and SIPC Investment advisory services offered through Independent Financial Partners, a Registered Investment Adviser.

Comfort – it’s what happens when you stop showing up to your not-so-new-anymore job 30 minutes early. It’s what happens when you start letting yourself eat in the car because the new car smell has worn off. It’s even what happens when you decide to pass a little gas on the couch next to your significant other because you both have been dating for months now and you’ve got that on lock.

In this industry, comfort is what happens when financial advisors move to the independent channel and rely more on client referrals than active cold calling and aggressive marketing. It’s also when they realize they can work Monday through Thursday, 9 a.m. to 4 p.m., make a decent living, and have the oh-so-coveted “work-life balance”.

In case the sarcasm isn’t registering, comfort is NOT good. In my opinion, comfort is one of the biggest reasons most independent financial advisors fail to reach their full potential as business owners and entrepreneurs. Now, I’m not saying that advisors don’t want to evolve and grow. However, many advisors easily maintain enough fee-based assets to generate recurring annual net incomes north of $150k. For many, this means that there’s a sort of safety net hampering any motivation to evolve their practice. The two examples below illustrate the negative side of comfort.

Example 1: Branding

For the most part, advisors are the worst when it comes to branding. Many of them don’t even want to discuss it because they don’t see how it will get them new clients. To add to it, the ones that do attempt to brand themselves will pay some outdated marketing firm too much money for a blurry logo and a website that’s full of what I call Viagra pictures – random people positioned awkwardly in a meadow or conference room. They do this because they’d rather go with the cheapest option since they’re unsure of the actual ROI and they’re too comfortable to research further.

Example 2: Learning New Things

Comfort seems to prevent advisors from continued learning. Early in their careers, advisors are soaking in all kinds of knowledge and seek to understand the products and services they need to offer clients. However, as they gain experience, many of them become less and less willing to learn new things and adapt to changes in our industry. For instance, take the idea of multi-generational planning. The need is greater than ever for advisors to leave transactional business in the past and embrace planning, not only for a client, but also for a client’s children. This means pro-actively connecting with those children, and it could also mean learning how fixed insurance fits into a client’s overall estate plan; both of these would require LEARNING and EVOLVING as an advisor.

Comfort Affects Your Bottom Line

I suppose many independent advisors fail to evolve or don’t want to learn because they see retirement for themselves 5 to 10 years down the road. Sure, it’s nice to run a cash flow analysis based on recurring revenue at a 2x multiple and imagine a nice liquidation event that can fund a life of Mai Tais and couples’ massages. Even if that were the case, why wouldn’t you want to maximize that liquidation event? Consider this: 66% of heirs change financial advisors upon inheriting their parent’s wealth. Let’s say I, as a millennial advisor, am looking to purchase a practice from a retiring advisor. You better believe I’m going to discount my offer price if I see no effort by the advisor to cultivate relationships with the next generation or provide estate and insurance planning for his or her clients. If anything is going to motivate an advisor to get out of his or her comfort zone, I would think a hit to their bottom line would do the trick.

Final Thoughts

It amazes me how many people in life become comfortable with their situation and lose the desire to constantly strive toward greatness. If you’re a business owner of any kind and you’re not constantly paying attention to shifting trends in your industry and evolving your business as necessary, you’re robbing yourself and the world of your full potential. I’m sure as parents you wouldn’t tell your children that it’s ok to be comfortable with B’s and C’s, so why do so many of us settle for less than we’re capable of? Do more. Do better. Constantly evolve. If just one person hears this message and embraces it, then it’s been worth my time crafting it.

Want to get out of your comfort zone or talk about IFP? Send me an email and we can chat.

Securities offered through IFP Securities, LLC member FINRA and SIPC Investment advisory services offered through Independent Financial Partners, a Registered Investment Adviser.