Addressing the Top Four Wirehouse Advisor Concerns About Transitioning to Independence

One of the defining trends within the financial services space over the last couple years has been the increasing frequency with which wirehouse advisors have transitioned to the independent channel. And as the financial crisis fades further into the rearview mirror, it is very likely that this crossover will only pick up in pace in the coming years.

For many clients, the deepest, most damaging scars of the financial crisis will never go away entirely. Nearly every investor had their confidence rattled and portfolios gutted, but thanks to a historic run up in equities over the last few years, most have recovered, both psychologically and financially.

Meanwhile, wirehouse advisors are operating in an industry that is getting older and more consolidated every day, even as many of the retention bonuses handed out by large wirehouse firms to their advisors in the panicked days following the financial crisis are starting to expire.

This has wirehouse advisors from across the landscape reevaluating their options. But even as the independent channel looks as attractive ever, especially now that the wirehouse brands no longer command the same levels of credibility and respect they once did. Nevertheless, from the outside looking in towards the independent space, many wirehouse advisors are still wary, many of them clinging to long-held – but largely untrue – perceptions about the space.

Having just recently made the transition to independence, I had the opportunity to do a deep dive on my greatest concerns about the transition away from the wirehouse space. I spoke to multiple successful advisors on both the independent side as well as those within the wirehouses to weigh my options and get a sense of perspective on my decision.

In the process, I realized that, for most successful wirehouse advisors, most transition anxieties boil down to the following four questions of concern, for each of which there is – contrary to popular opinion in the wirehouse space – a very good answer:

  • What if my clients don’t follow me? Without question this is the greatest fear among advisors changing firms. Clients are the lifeblood of the business, and given that most people are resistant to change, especially when it comes to their finances, it’s only natural for advisors to worry about client retention. They shouldn’t.

While hard numbers are elusive, most industry observers believe 60-90% of clients stay with their advisors through transitions. And for those advisors who have built close relationships and a deep reservoir of trust with their clients, it’s safe to say that the retention rate is at the high end of that spectrum.

Wirehouse advisors making the transition to independence just need to be up front with their clients and communicate clearly and as early on in the process as possible about why they are making the switch. The typical reasons – such as how the added freedom and flexibility that the space provides is ultimately in the end client’s best interests, and how being independent will allow the advisor to spend more time and resources on making the client experience infinitely more rich and fulfilling – resonate well. Wirehouse advisors would be surprised about how they will more than likely keep the overwhelming majority of their client relationships if they communicate early, often and honestly.

  • What if I can’t handle the burdens of running my own business in addition to supporting my clients? While the notion of starting and running a small business appeals to some advisors, many others are turned off by the idea having to provide their own administrative, back office and compliance support. It’s one of the top reasons they remain within the wirehouse world, where they are provided such services in a professional, white-shoe environment so they are free to do what they do best – work with clients.

What wirehouse advisors don’t know, however, is that many independent firms have successfully recreated this experience, leveraging broker-dealers and third party providers to provide best in breed support services, with the added freedom and flexibility that allows advisors to serve clients more effectively and run better businesses. Whether it’s someone looking to set up their own one-man shop or a network of advisors coming together to replicate the feel of wirehouse firm, the independent channel today in fact offers a range of business models to accommodate almost every approach.

  • What if the technology and investment solutions I have to work with as an independent advisor are inferior to the wirehouse space? In the past, there’s no question that wirehouse firms offered superior technology tools and resources, along with a broader selection of investment solutions to better help clients meet their ever changing needs. Today, though, that’s no longer the case. Blame the free market.

Whereas wirehouse advisors are offered an in-house solution, and they have to live with it, for better or for worse, independent advisors mostly determine what works best for their businesses. If they find something that works better, they often have the liberty to change providers or seek relationships with new product companies, thanks to the fact that the larger independent broker-dealer platforms now have the pricing and selection power that comes with increased scale. As a result, where there was once a big gap, wirehouse and independent platforms have become virtually indistinguishable with respect to the quality of technology and product platforms. In fact, in some cases, the financial planning and customer service software is far better on the independent side.

  • What if my business growth opportunities will be more limited without the backing of a large, recognized Wall Street brand? This is the fourth most common conern that wirehouse advisors raise about potentially going independent. Frankly, it’s also the last thing wirehouse advisors should be worried about. Many Wall Street brands are beginning to grapple with much higher costs stemming from a recent spate of large regulatory fines and increased pressure among shareholders. And with pay grids coming down and account fees going up, it’s clear that advisors and their clients are being asked to foot the bill for such costs. In other words, the rising legacy costs that wirehouse firms have will be paid for by their advisors and the advisors’ end clients – Which hardly translates into greater business growth opportunities.

Also consider that most wirehouse firms are needlessly wasteful and hopelessly inefficient, plagued by layers of management and costly training programs that yield few, if any productive advisors. Ultimately, is all of this worth a 50% premium to have a recognized brand on your business card? Only a cursory examination of all your options will tell you that it is not. As stated above, advisors provide value and create growth opportunities, not brands.

As a [xx]-year veteran of the wirehouse world who recently transitioned to the independent space, I can tell you that there has never been a better time to make the same switch. Not only are clients ready but the shifting industry dynamics are virtually begging for it.

And while there is no doubt that all transitions are stressful and fraught with potential risks, at the end of the day wirehouse advisors should take comfort in the fact that finding an easy landing place, one which combines all the best aspects of both of the independent and wirehouse worlds, is easier than they might think.

Steven Dudash is President of IHT Wealth Management (, a Chicago-based firm of experienced wealth management professionals with approximately $[592] million in assets under management

Securities offered through LPL Financial, member FINRA/SIPC