Experienced financial advisors who set up their own independent business are finding the water is just fine.
In fact, financial advisors are leaving wirehouse firms in growing numbers to start their own independent practices. This trend is driven by factors such as greater control over business decisions, increased autonomy, higher pay, and better work-life balance. Financial Planning cited a Cerulli Associates report stating that “independent channels…are poised to continue growing their assets and advisor headcount at the expense of traditional wirehouses”.
Wirehouse firms are also dealing with diminishing financial advisor satisfaction. According to the 2022 U.S. Financial Advisor Satisfaction Study by JD Power, overall satisfaction among what are described as ‘employee advisors’ is 741 (on a 1,000-point scale). And that rate declines further as advisors' years of experience increase, with those who have 20 or more years of experience scoring lower than those with less experience. The same study indicates 15% of wirehouse advisors will consider leaving their firm in a year or two. It is important to note that compensation structures can vary widely among wirehouse firms and that individual advisors' compensation will depend on their specific role, production levels, and tenure.
Independent Advisors: Freedom
Independent advisors have the freedom to choose the products and services they offer, the technology and tools they use, and the way they manage their business. They can also make decisions about how they structure their compensation, such as whether to charge fees based on assets under management or offer a flat fee for their services.
Compensation changes at wirehouse firms may be a factor in wirehouse advisors choosing independence. According to a recent article by Think Advisor, wirehouse compensation is shifting away from traditional production-based models to fee-based models. Some experts cited in the article predicted there would be a return to changes in wirehouse compensation grids and increased emphasis on team-based compensation.
These shifts can impact the compensation that wirehouse advisors receive, which may prompt them to explore independence as an alternative. As the Financial Planning article noted “The advisor population at employee-based firms is expected to shrink while independent firms expand their ranks.”
Cutter & Company, a Registered Broker-Dealer and Investment Advisor, helps experienced financial advisors set up their own practices. The Cutter & Company compensation structure has not changed since the firm began operations, other than to become more beneficial for the independent financial advisors who work with the firm. It is among the reasons independent advisors consider working with Cutter & Company to set up their business.
Increased autonomy and control can result in a better work-life balance for advisors and the ability to build a business that reflects their own personal brand and philosophy. Additionally, it can also lead to increased job satisfaction and a stronger connection with clients, as advisors can focus on delivering customized solutions that meet their clients' unique needs.
Financial advisors considering the advantages of starting their own practice should contact Cutter & Company to learn more. With the growing trend of financial advisors leaving wirehouse firms, and with compensation changes at wirehouse firms potentially impacting their earnings, now may be an ideal time for financial advisors to take control of their careers and their financial futures by becoming an independent advisor.