Brokers, dealers and financial advisors that are considering leaving large wirehouses to go independent or join another Registered Investment Advisor (RIA) are often plagued with questions about the pros and cons of doing so. They may find themselves echoing that old song that goes, “Should I stay, or should I go?”
The findings of the TD Ameritrade Institutional Break Away to Independence Spring 2020 Survey can be helpful when considering the options. The survey showed that 60% of brokers agreed that they were currently “more likely” than six months ago to break away.
Do RIAs make more than wirehouse workers?
One of the first questions that often comes to mind when deciding to break away is how it will affect income earning potential. Rather than a commission, RIAs usually receive a percentage of Assets Under Management (AUM). This can often translate to earning more as a result of a breakaway.
What options are available for those looking to break away?
According to the survey mentioned above, four main routes are usually taken when breaking away:
- 39% chose to acquire or merge with another business
- 25% decide to start their own business
- 19% join an existing firm as an employee
- 17% chose to partner with a company for support
There are various options available, but the four listed above are the most common routes taken during a breakaway.
Things to consider before making the leap
Depending on the unique factors of the person that has chosen to break away, there may be several things to consider. Possible factors to consider include noncompete clauses, compensation packages, RIA’s having a higher fiduciary responsibility, contract review to corporate formation to compliance documents.
Having professional counsel that is experienced in practice migration can help greatly with transition assistance.