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First Things to Consider on the Path to Independence

Featured on TDAinstitutional.com on August 24, 2019

If you could start from scratch and build your ideal advisor office, what would it look like?

Just as importantly, what's the ideal use of your time to make sure you are best serving your clients?

These are among the many decisions newly independent advisors face when deciding to pursue the RIA classification and leave behind a wirehouse firm. The biggest question is whether RIAs want to open their new businesses as sole proprietorships or partner with existing RIAs. Both options have pros and cons, and it's important to consider your mindset and your business needs before making one move or the other.

Determine your style

Deciding between a sole proprietorship or an established firm is based in part on your style of doing business. “The first thing to assess is what type of advisor business personality you are and if you are truly comfortable with becoming an entrepreneur," suggests Shad Besikof, president and chief operating officer at TruClarity, a division of a UHNW single family office that specializes in helping wirehouse, independent broker-dealer, and private bank advisors transition to the independent space so that they can focus on managing client relationships instead of spending valuable time on the middle and back office.

Besikof says that when advisors want to assess their desire to transition to independence, he's developed a method for helping them do so and believes he can honestly tell them whether they're a fit or not. He sees advisors as falling into one of three categories:

Self-directed: Those who want to take control of all aspects of their business, including minute details and tasks that are often outside of the advisors' scope of work, such as: selecting a custodian, managing compliance, negotiating leases, building out office space, sourcing an IT help solution, dealing with employment contracts, payroll, marketing, determining the best technology stack, building/maintaining a websites, conducting fee-billing, accounting, and human resources-related issues.

Validator: This group prefers to have a sounding board who can provide a much-needed second opinion on all matters related to their business operations. They welcome recommendations, but may take action on their own. Or, they may hire consultants to outsource a portion of the process they're not comfortable doing on their own.

Delegator: Those who don't mind outsourcing all of the non-revenue generating tasks they don't have interest micromanaging. Outsourcing middle-back office responsibilities helps them operate at the top of their licenses and professional designations by focusing on the specific parts of their jobs that they enjoy, such as growing their business and helping existing clients.

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