FA Center: What to expect if your financial adviser decides to become a solo practitioner

After a decade working as an adviser for big firms, Ashley Foster sought a career reset. So he decided to go solo. Foster, 35, joined many of his peers leaving financial services giants to launch their own independent practice. Eager to test their entrepreneurial chops, they confront myriad challenges from convincing clients to follow them to finding office space to navigating regulatory compliance issues.

“I was tired of the hit-quotas-and-sales rat race,” said Foster, a Houston-based certified financial planner. “And when you’re part of a very large national broker-dealer, you’re in a box” with little freedom to customize your marketing or use social media to build visibility and control your messaging and brand identity.

More than 800 advisers fled wirehouses or broker-dealers to join RIAs in the past five years, according to Financial Planning magazine. Many of them face emotional and financial hurdles as they seek to reconfigure their business model, recover their startup costs, and set up internal processes to support their new operation.

Reflecting on his first year of independence, Foster credits a few early moves for helping him hit the ground running. At his old firm, he earned a commission on investment or insurance products that he sold to many of his pre-retiree clients. Now he wanted to build a fee-only practice for a younger clientele, so he sold nearly his entire book of business to another adviser and started afresh with a target market of individuals and families in their 30s.

“My ideal client profile is a 34-year-old female, married with one child or one on the way, with a household income of $ 150,000,” he said. Rather than pitch commission-based products, Foster charges clients an upfront fee ($ 1,500-$ 6,000) plus a monthly retainer ($ 200-$ 600).

“I wanted to provide comprehensive financial planning services in a way they could afford,” Foster said. Because millennials are accustomed to a monthly subscription model, he figured they’d embrace his fee structure. He’s signed on 14 households thus far.

Like other advisers who’ve gone independent, Foster emphasizes the importance of formulating a clear vision for the first two years on your own. As part of your planning process, he suggests addressing questions such as:

• Whom will you work with?

• What value will you bring to clients?

• What will you charge?

Knowing that his income would take a hit in the early going, Foster built a nest egg before quitting his old firm. He also joined XY Planning Network, a membership organization that offers technology and compliance support and other benefits to independent advisers. Once he left, he saved money on rent by negotiating favorable terms on a WeWork shared office site in his area.

While Foster sold off most of his book of business, other advisers who plan a move to independence invest significant time and care into communicating with clients during the transition. The goal is to reduce confusion and fear so that clients understand what’s happening and what’s to gain by sticking with their longtime wealth manager.

Within two weeks of Charles Adi leaving his employer to open his own practice in 2017, the certified financial planner called all 80 of his clients to inform them of the situation. Because he had set up his own customer relationship management (CRM) platform three years earlier — separate from the one his employer used — he had access to his clients’ contact information and accounts. 

“I got in front of it so clients heard first from me that I had left,” Adi said. “I wanted to be their point of contact. I told them I had all their account information and I was monitoring their accounts during the transition, and that gave them peace of mind.”

Assuring them of his intent to remain in the business as an independent adviser — and giving them a sense of how long it would take (in his case, two months) for him to complete the registration process and open his new firm — helped solidify his bond with them.

Often advisers are limited in how much client data they can take when they leave a large firm. So-called “protocol” agreements among financial firms are commonplace; they impose strict rules on what pieces of information outgoing advisers can retain.

‘Once you make the decision to leave, you want to be as close to your clients as you’ve ever been.’

Financial adviser Rob Carrigg Jr.

In the months leading up to Rob Carrigg Jr.’s move from a big firm to join Steward Partners Global Advisory, an independent partnership, he laid the groundwork by checking in with his clients. While he wasn’t able to tell them about his upcoming plans, he found that simply reaching out and staying in touch proved valuable.

“Once you make the decision to leave, you want to be as close to your clients as you’ve ever been and tie up as many service-related loose ends as possible,” said Carrigg, a certified financial planner in Portsmouth, N.H. “That creates some awkwardness when you can’t mention you’re going to move. But after you move, you can explain why — that it would’ve been a breach of a contractual obligation with your old firm — and they’ll understand.”

Like Adi, Carrigg prioritized talking to clients in the immediate aftermath of his departure. With protocol agreements in place, he could only keep a few bits of basic information on each client. He prepared for each call by thinking through each client’s unique situation and anticipating their questions and concerns.

“When you leave, a clock starts ticking,” Carrigg said. “You want to spend as much time as possible contacting your clients. This was the biggest decision of my life. My wheels were spinning 24/7 on how to make this work.”

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Read: Why DIY investors still might want a financial adviser

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