Most advisors want independence, but few make jump, survey says. Short-term financial goals keep many advisors in their traditional channels. There are now options for advisors who want to go independent through a custodian, plug into an existing independent, use a platform firm for a turnkey solution, or almost anything in between.

1. Most Advisors Want Independence, but
Few Make Jump, Survey Says
Short-term financial goals keep many advisors in their traditional
channels, according to recruiter Mindy Diamond
BY JANET LEVAUX, ADVISORONE
April 10, 2012
A survey of some 2,500 traditional employee advisors found that more than 70% are considering
a move to independence, Diamond Consultants, a recruiting and consulting firm, said Tuesday.
Still, experts say, just 10% at most will actually make the move.
"Financial advisors are becoming increasingly attuned to the growing
number of high-quality independent practice models,” explained Diamond
Consultants president and CEO Mindy Diamond (left), in an interview with
AdvisorOne.
That said, Diamond explained, many of the 70% will not go independent
“when they really see what it is about and what it is not about: It is not
about upfront money, big upfront money, and there’s no cachet of a big brand-name firm.”
According to the study, conducted by Diamond Consultants in the first quarter, advisors want to
have greater control over their businesses and the ability to be a buy-side advocate for clients. In
addition, advisors are seeking less bureaucracy, a more client-focused culture, greater freedom
and flexibility, and the desire to build equity in an enterprise.
"There are now options for advisors who want to go independent through a custodian, plug into
an existing independent, use a platform firm for a turnkey solution, or almost anything in
between," Diamond said. "The possibilities are extensive and exciting."
Diamond Consultants has placed four teams with a combined $2.5 billion in client assets with
independent firms so far this year.
“The quality of the advisors and teams going independent today is far greater than that of the
past,” the recruiter said. “The quality is way up in terms of the size of the books of business,
which is about $500 million to $1 billion in assets typically and $3 million to $4 million in
revenue.”
As more teams make the jump to independence, their stories “help others realize that they too
can make this leap and enjoy the freedom to design and grow their practices their way,” said
RajiniKodialam of Focus Financial Partners, a nearly $50 billion aggregator of RIA firms, in a
statement. “In fact, Lori VanDusen's recent move here, to form LVW Advisors, is a great example
of an industry luminary who made the change and couldn't be more pleased with the outcome.”
Still, the decision is a tough one for traditional brokers, Diamond admits, mainly because of the
short-term financial concerns. First, the advisors don’t get the upfront bonuses—which can
be as much as 200%of their trailing-12-month fees and commissions—associated with moving to
another wirehouse. And, second, they may have to walk away from some deferred
compensation, unamortized retention packages and other perks.
“I’m working with a super-entrepreneurial Merrill Lynch team that is committed to moving to
independence,” Diamond said. “They were offered 200% cash up front by another wirehouse,
which is, they’ve said, the last move they’d want to make. I don’t know the answer yet, but I bet
they take it.”
Independence, she explains, is a long-term proposition that tends to happen when an advisor
finds the “perfect timing.” Otherwise, advisors look at all the details, Diamond says, and decide
“they’re not as entrepreneurial as they once thought.”