I have spent quite a bit of time on the blog and podcast explaining why it might make sense to go independent--and I’ve spent a lot of my fourteen years in the industry either figuring that out for myself or talking to other advisors and articulating a case for doing so.
I think it is time to have a discussion about when you would NOT want to go independent. Obviously it’s not for everybody. If it was for everybody we wouldn’t need this blog. There wouldn’t be 60,000+ employee advisors concentrated in bank-owned firms. So, this is the fifth in a list of reasons why you definitely would not want to go independent.
You should have a good idea of how many clients will follow you if you decide to go independent.
Number five of why not to go independent (a pretty big one), if you don’t think you’re clients will go with you then you should not go independent because all the economic benefits, the flexibility, the control - if you don’t have clients, it’s sort of pointless.
So, times like that might be an issue. If you recently inherited a lot of accounts or clients/relationships, you don’t have a depth in these relationships and they've been with your firm longer than you or longer than your relationship with them, there’s a good chance they’re not going to come with you. So I’d recommend, in that case, sticking around, getting to know your clients, making those relationships with you -- the longer the better.
There’s always going to be a point where you have to pull the trigger if you’re going to do it but in general, if you’ve inherited relationships, they’re not your “clients”. When we do the analysis of who we see being successful in transition, advisors that work at commercial banks (retail banks, not the wirehouses owned by banks but the Bank of America, the Wells Fargo bank program), those advisors tend to have lower retention than than a wirehouse or large regional firm person who's been at the same place long time.
My friend has been at the same firm for fourteen years, so I expected a very high retention. I actually am recording an interview series with him. I’ve already done two episodes, two different parts of that -- one was about two weeks before he moved, and one was about two days before he moved. So I will be interviewing him a several more times to kind of hear the progression of that at some future time when his noncompete is over, etcetera.
My point is he’s going to have a high retention because he was at one firm for fourteen years, developed very deep relationships, did a good job for people and one firm with satisfied clients, that’s a pretty easy thing to predict in having high retention. But if you've been at the same firm and you took over, let’s say if someone inherits his office at which they are, and two years from now they try to leave, they’re not going to take much because those clients that stay behind with the original person leaving, they’re definitely more attached to the firm now than the individual advisor. No doubt about it.
Or if you’re in a bank or if you’re an employee and you think all people who you helped work with, you serviced their relationship, you’re the point person but there’s a much bigger organization behind you, especially if there’s a founder that has worked with them, you’re probably not going to be able to take as many relationships as you think. So, just be very careful about that.
Again, I think there’s a lot of resources out there but I’m happy to answer questions if people have a specific situation that they’d like to discuss. So, that was number five, if your clients won’t come with you, do not go independent.