An investment advisor team in Florida wanted to shift their traditional full-service business into a family office that could do more for their clients, including providing concierge services, paying customer bills and handling finances. To do that efficiently, they needed to find a partner that offered automation software. Being newly independent, they had no experience choosing from a wide array of choices. Fortunately, they turned to a partner with years of experience sifting through the multitude of solutions being marketed to the growing number of independent advisors. They found a solution that fit the team's needs and enabled them to better serve their clients with the most effective tools available.

Partnerships
How can you keep from flying blind? Find vendors who share your vision for the future and who have the capacity and culture to work with you as a partner-not just as a vendor. Four years ago, an investment advisor I know overhauled their entire technology infrastructure. They dismantled their computer system and rebuilt it over a weekend after years of planning. Come Monday, the system failed. Without the kind of personal relationship they had built with their platform provider, the business would have gone into serious meltdown. Instead, their provider rolled up its sleeves and helped them put out the fires.

Investment advisors should consider size when looking for partners-you don't want to select the smallest firm that doesn't have the resources you've come to rely on. Nor do you want the biggest firm out there that might not be able to provide the attention and service you need in the crucial formative years of your practice. Advisors need a voice in the partnership, and a vendor that is neither too big to pay attention nor too small to do anything about it is the perfect fit.

You also want a vendor that understands the intricacies of the business you're in. If your clients are focused on global trusts or ETFs, your custodian should have expertise there. Likewise, a firm that builds contact management systems for healthcare companies might not understand the compliance regulations that are unique to financial services. A general approach is not always best when picking a partner to get you through the crucial first years.

Clients
Once you have everything in place, you need to communicate the transition to clients. Tell them why you are breaking away and how the move will be beneficial for them, as well as for yourself. When it comes to the complicated matter of transferring accounts, many successful breakaway advisors invite clients to a signing party, where they meet face-to-face, give a presentation about the transition, along with packets of account forms. Staff is available to make sure everyone fills out the documents correctly and thoroughly.

Finally, too many would-be independent advisors wait for the perfect time to break away, but I've learned from experience that external factors are a poor indicator of the "right" time to make a move. Good market conditions breed complacency, while poor performance might make clients too anxious to consider a transition. The only indicator for when an advisor should break is their own internal clock, when their specific goals for the business and their future require action.

Breaking away requires self-confidence and a sacrifice of time and resources to implement and enforce best practices, policies and procedures. Advisors may find that they have to forego some compensation now for a bigger stake in the future. To succeed, they must have a well-stocked arsenal for reducing business risk while expanding service capabilities. Finding the right partner with expertise in the business of independent investment advising can mean the difference between success and failure. Ultimately, if done the right way, your only regret should be that you didn't break away sooner.

Craig Gordon is the director of RBC Correspondent and Advisor Services. RBC Correspondent Services provides clearing, custody and execution services for independent broker-dealers. RBC Advisor Services offers custodian, brokerage and wealth management solutions for RIAs serving high-net-worth clients. RBC Correspondent Services and RBC Advisor Services are divisions of RBC Capital Markets LLC, member NYSE/FINRA/SIPC.

 

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