Jack Petersen’s life as a financial advisor changed on July 24, 2015. After pushing back from his desk, standing up and walking down the familiar hallway of Barclays in Manhattan, he bid farewell to his boss forever. At the time, Barclays was in the process of selling its business to Stifel.

“I’ll never forget that day,” Petersen told Financial Advisor. “It's hard to say good-bye, but it was also very exciting.”

Petersen, six advisors and their seven member support staff in three cities walked out of the wirehouse at the same time with $2 billion in client assets. They never looked back and together today they have $3.4 billion under advisement with 36 employees in four cities.

“I had hope for the future, and I felt really good about what we were doing for our clients as I was convinced we could offer a better platform as an independent advisor, but I had a lot of anxiety as well,” Petersen said.

For nine months, the determined partners had planned and plotted on phone calls from New York, Chicago and San Francisco about teaming up, leaving the wirehouse business model and launching their own registered investment advisory (RIA) called Summit Trail Advisors. But the path was strewn with obstacles, including potentially being slapped with a lawsuit if the plan was not executed according to broker protocol, which is an agreement between major wirehouses that outlines what client information registered representatives can take with them when switching.

“It got a little complicated at the end, but everything was in line with broker protocol departure and we were careful not to violate Barclays code of conduct,” said Petersen. “We went to great lengths to work with outside counsel to guide us on what to do and how to do it.”

Petersen is among a rising number of advisors who are leaving wirehouses in groups to find greener pastures at their own RIA.

“There's many innovative solutions that are available to the RIA market that advisors are enticed by,” said Marc Cohen, chief operating officer with MarketCounsel in Englewood, N.J. “Some of this new technology is phenomenal and the wirehouses simply are not taking advantage.”

Independent RIAs have been on the rise for years. What’s new is the size of the teams of advisors that are leaving b-ds.

Hightower has been assisting mega teams of advisors to transition their books of business that range from $100 million to billions of dollars since 2009.

“Our largest team consisted of a few senior financial advisors with a dozen or more supporting staff members,” said Elliot Weissbluth, CEO and founder of Hightower, with headquarters in Chicago and New York. “When we have a mega team of advisors, often the advisors have slightly different roles on the team so we tend to have a lot of dialogue,”

The wirehouse asset base has shrunk 1.9 percent since 2015 but the independent RIA channel has grown assets by 6.2 percent compared to an average of 0.9 percent for all advisor channels, according to Cerulli Associates.

“To survive this trend going forward, wirehouses need to focus on segmenting their business of manufacturing and selling products and stop pretending that they are fiduciaries providing service,” said Weissbluth. “They need to leave the servicing to real advisors.”

Firms like Dynasty, Hightower and MarketCounsel have sprung up in recent years to assist advisors transition to the freedom and flexibility that an independent advisory practice promises. “It's super important that the decision making on the team rests with a small number of advisors who are empowered to make those decisions,” Weissbluth told Financial Advisor.

Since Dynasty Partners launched in 2011, the average size of the book of business being transferred by freedom hungry advisors has increased from $250 million to $700 million.

“We've launched multiple businesses that consist of a number of advisors,” said Shirl Penney, founder and CEO of Dynasty Partners.

Just last year, MarketCounsel transitioned a team of 13 advisors and the staff that supported them.

“They came to us to help them determine the team’s partnership structure, management responsibility, share of income and of the firm's equity,” Cohen told Financial Advisor.
The rising size of breakaway advisor teams indicates that the groups are aiming for a larger cut of the books of business and the assets they manage.

“We're seeing advisors' income increase from a 30 to 40 percent payout at wirehouses to a 55 to 70 percent payout on the independent side,” Cohen said. But no matter how eager, coordination and cooperation is key when a team of 10 or more advisors are lifting a multi-million or billion dollar book of business, according to experts.

“There's a very clear step-by-step process that advisors are required to follow to be able to do this successfully,” said Cohen. “Many advisors don't realize the intricacies of their employment agreement or the legal ramifications of departing their existing employment and soliciting their clients”

When he witnessed the culture deteriorate at Merrill Lynch after it was acquired by Bank of America, Branch Manager Steve Altman teamed up with four co-workers to launch an independent registered investment advisory called TRUE Private Wealth Advisors in Salem, Ore.

“We just got tired of defending Merrill Lynch Bank of America to our clients,” Altman told Financial Advisor Magazine. “There’s an inherent conflict when you have one firm that provides the custody, the advice and produces products.”

Altman isn’t the first branch manager to move from a wirehouse organization to form his own RIA. “In the last three to five years, we’ve seen a rise in former producing branch managers leaving large national firms to form their own business with an interest in recruiting advisors into their business,” said Scott Curtis, president of Raymond James Financial Services, the firm’s independent business model. “One potential pitfall is if the branch owner recruits a significant number of advisors from the same office, a collection of offices or even within the same complex, it may open the door to a raiding claim."

But Altman didn’t hire his breakway team from his former employer. His partners Todd Gesher, Jason Herber and Brett Davis had been working together for years at Merrill Lynch before they began to organize for better things every Tuesday at 5:30 a.m. at a local restaurant.

“We transferred $260 million in assets as a firm and today we manage $640 million,” Altman said.

What has become TRUE Wealth Partners required six months of planning before launching in September 2012.

Although they were discreet, management at the well-known wirehouse discovered their plan. “The regional director called and asked to meet with me to discuss the rumors that I was unhappy and looking to leave,” Altman said. “I did not want to meet with my supervisor so we ended up walking out a week early.”

Because Altman resigned under broker protocol resignation, he avoided litigation, which is the biggest risk that antsy advisors face when breaking away from a wirehouse in search of freedom and flexibility in their own RIA.