Community: While there are a fair amount of top advisors in the IBD world, a majority of the corner office folks who are interested in building an enterprise practice are in the IBD/RIA hybrid space. As a result, the IBD community can be wrong for some advisors.
To put this into perspective, let’s consider “Larry’s” story. A high-quality financial advisor, Larry has worked at the same wirehouse firm for almost 20 years. He has a book of 75 high-net-worth clients and manages just shy of $600 million, generating annual revenue of approximately $4.5 million in fees. In major growth mode, Larry has been offered outsized transition deals from other wirehouse and regional firms, and could take his enviable book and go anywhere he chooses—or not. But Larry has always had an itch to be a business owner, so he knew that if he left his firm, it would be to enter the land of independence.
Over a period of a year, he met with business development folks and senior leaders from five different IBDs, RIA custodians, service providers like Dynasty Financial Partners, and quasi-independent firms like HighTower Advisors. Each of the prospective firms were wildly interested in Larry because he is personable, has built a great and growing business, which is 75 percent annuitized, and has no compliance issues.
After all of these meetings, Larry was left to determine which space would serve his business best: RIA or IBD?
Many might say, “Why not go to the highest bidder?” Truth be told, there is no free lunch: While transition money is often very attractive, that may mean giving up some freedom and flexibility.
No matter which choice Larry—or any other advisor who finds himself at this same fork in the road—makes, the key is to move forward knowing what limitations may lie ahead. Ultimately, whether he chooses the IBD or RIA space, he will still have more independence than he has now—and often, that’s what matters most.
Mindy Diamond is the president and CEO of Diamond Consultants Inc.