By Victoria Bowen
At this time of year many of us take stock of our business and often make decisions and take some form of action in the New Year. Common thoughts, for Advisors who have built their practices within the walls of a national or regional wirehouse or insurance company, center around, among other things, level of payout, the value of the equity in their practice and flexibility in the way they work with clients.
Transitioning a practice to a more independent model meets many of the tests to a potentially more fulfilling (and lucrative) practice and seeking advice from an unbiased source to assist in investigating what it would take to do it is certainly a worthwhile exercise. However, there are 4 simple steps you should follow to organize your thoughts and prepare you for launching a serious investigation effort.
Step 1 – Identify Your Goals
Having goals and objectives for making what will be a significant change in the way you make your living and take care of your family – and its future – is a critical step in the process and so an important question to ask yourself at the onset is, “What is it you want to accomplish by making a transition?”
The spectrum of answers is wide and can run from:
• Freedom of product choice
• To succession planning (in terms of who will take care of your client’s needs as well as maximizing the practices value)
• To the level of fiduciary services that can be offered
• To setting personal production levels for yourself (and not having them set for you by an employer) ….. And many things in between.
Be introspective about your answers as they will serve as the nucleus of your ultimate goals.
Step 2 – Select a Business Model
The business model selection is arguably the most important decision an Advisor, who is thinking about making a change, has to make. That decision must take into account how you have done business in the past and how you see you’re practice evolving in the future, i.e. what will it look like in 5 years?
An experienced Advisor certainly knows the four primary models – Fee-only, commission, hybrid or forming their own firm. But the crux of the decision lies in how to best maximize the revenue streams of all types of business; past, present and future.
Step 3 – Write a Business and Action Plan
It is often said, “A person that can express themselves in a business plan is the one that is ready to make a change in their business.” The plan does not have to be and epic nor spell out all the details of the transition. However it should have certain content elements:
• Realistic, functional and operationally well thought out
• Goals, objectives and expectation should be articulated
• Provide estimates of:
− How many of your clients will move with you
− Cash flow projection
− Capital requirements to make the transition
− Time line
Advisors that do well as independents must be great Advisors and great business owners. To prove that you are both – to yourself as well as to those that you will be working with if you choose to move forward – developing a cogent plan will go a long way.
Step 4 – Be Thorough in the Investigation and Do Your Homework
As you research your options and alternatives, tap into your resources:
• Recruiters and consultants can be very helpful as sources of information. Using the services of an independent recruiter or consultant can be helpful in putting an unbiased focus on what is the most advantageous path to pursue.
− An independent consultant can also provide guidance on what type of independent options (RIA, Independent broker Dealer, Hybrid firm,etc..) would best suit your needs and can assist you in investigating specific opportunities.
• Speak with advisors that have made a transition to the firms you are considering, (most will supply a list of those open to speaking with you.) A good idea is to have a written list of questions* that can guide the discussion and will make it more productive.
− * Questions like, “Ease of use and completeness of their product platform”, “How did the ACAT process go?” and their opinion of “the overall fee retention structure,” etc.
• Get a good sense of the capitalization, ownership structure, culture and reputation of the firms you are considering.
Because most advisory practices are unique, the process and the type of information required is a little different for each – what worked for one case might not work for another. However, having said that, many aspects of making a successful transition are predictable and can be comfortably managed. Reaching out to experts, building a support network , having a solid business/action plan and transition time-line will be of great value and make things considerable more manageable.
Considering making a move in 2012? Contact Victoria at Bowen Enterprises LLC (www.BowenEnterprises) at 617-217-2839 or Victoria@BowenEnterprises.com .
