What’s your definition of independence?

Recent events in the news may have some advisors questioning if they are really independent or not. Hightower has been in the spotlight for taking multiple former advisors from their firm to court – alleging that they wrongly took client information from Hightower when establishing their own firms.

To many advisors' ears, these stories sound all too similar to the tales of wirehouses suing advisors for taking clients with them from a captive environment to an independent one.

Advisor independence has been treated simplistically in the media as a binary choice between the wirehouses and the RIA model for years. But in practice, there are many gray areas in operating as an independent RIA, especially when a solo advisor joins an RIA aggregator.

Knowing the truth of how independent you truly are is all about doing your homework before you decide to join an RIA.

Here’s how to leave the wirehouse with your eyes wide open so you know exactly what you’re getting into.

Do Your Homework
The reality is that you wouldn’t bring a prospect into a meeting, do zero homework on their situation, and then suggest that they point their money simply anywhere in the market. When you talk to a prospective client, you do your due diligence, and you craft a financial and investment plan that fits what they’ve indicated they want.

When looking at options as an independent advisor, you have to do due diligence on the landscape as a whole and research what type of independence the various entities can offer to you.

Making the wrong choice and getting less independence than you thought you were getting puts you at too much risk and could even derail a promising advisory career entirely. If you try to leave a firm you thought was independent and instead get tangled up in a legal fight with a large company with significant financial backing that can get their message and version of events in front of your clients more effectively than you can, you’ll be in a very uncomfortable position very quickly.

Part of doing your due diligence is entering any agreement with the understanding that businesses all need to make money to be successful. If a firm is incentivizing your move, they aren’t doing it out of the goodness of their hearts. They will be expecting production and profitability from you in exchange, and they won’t take kindly to it if you don’t deliver your end of the deal after you join.

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