The Reality of Starting an Independent Advisory Firm
In a recent “practice management for financial planners” class at Texas A&M University, not a single student raised their hand when asked if they were considering starting an independent advisory firm after graduation. Each student expressed a preference for gaining experience working under someone else before venturing out on their own.
As a former certified financial planner who spent 15 years working for large broker-dealers before launching my own RIA in June, I can relate to their hesitation. However, seven months into my independent venture, I’ve discovered that many of the fears that held me back were unfounded.
Don’t feel ready? Go independent anyway
Readiness is a myth. Whether you’re a recent graduate or a seasoned professional, starting an independent RIA requires a leap of faith. Confidence comes after taking action, not before.
While working at a major broker-dealer, I was conditioned to believe that going independent was risky, expensive, and unattainable without institutional support. I was apprehensive about losing the perks and support I had grown accustomed to. However, I soon realized that setting up an independent practice was more feasible and cost-effective than I had imagined.
Upon analyzing the numbers, I discovered that my take-home pay as an independent advisor was significantly higher than when I was working for a broker-dealer. Despite the initial expenses and challenges, the autonomy, flexibility, and control over my business made the transition worthwhile.
DIY and delegate at work and at home
While going independent can be costly, especially in the beginning, being resourceful and frugal can help mitigate expenses. Embracing a scrappy mindset and being willing to handle tasks yourself can save money and build a foundation for your practice.
By affiliating with a broker-dealer under a hybrid RIA model, I retained autonomy and ownership of my book of business, a crucial factor in my decision-making process. I also leveraged part-time assistance and a network of trusted advisors to support me in various aspects of my practice.
Delegating responsibilities gradually allowed me to focus on client relationships, business growth, and personal priorities. While the transition to independence presented new challenges, the rewards of building my brand and business far outweighed the initial uncertainties.
‘Different flavors of someone else’s pie’
Exploring various options in the financial advisory industry, including major broker-dealers and RIAs of different sizes, led me to realize that true independence meant creating my own path rather than fitting into existing structures. The freedom to build my brand and business according to my vision was more valuable than any immediate financial gain.
Seven months into my journey as an independent advisor, I have found the experience to be both rewarding and enlightening. The decision to start an RIA has proven to be less costly and more fulfilling than I had anticipated. My advice to others considering independence: don’t wait for the perfect moment, create it.
Even in the early stages of transitioning to independent practice, looking back, I can’t help but think that I should have taken this step years ago.
For more insights on the costs and benefits of running a new RIA, you can visit here.
