5 tips for breaking away
Over time, the pain of staying in a wirehouse environment can outweigh apprehension over the work it takes to leave, two veteran advisers told participants during a Financial Planning webinar covering the challenges of going independent.
“We were at a firm where the answer was typically ‘no’” when it came to having “the freedom and flexibility to build our brand,” Winnie Sun said of her 11 years at Morgan Stanley Smith Barney.
She and a co-founder left five years ago to launch Sun Group Wealth Partners in Irvine, Calif.
Joining her on the webinar was veteran Paul Rand, who spent 15 years at Morgan Stanley before going independent this year.
Since starting her own firm, Sun has become one of the most successful advisers in the country at leveraging social media, an avenue of promotion she couldn’t have pursued while working for a wirehouse, she says.
Her Twitter feed boasts more 80,000 followers, besting even much bigger names like former Federal Reserve Chairman Ben Bernanke, who has about 68,000.
Sun Group Wealth Partners is affiliated with independent broker-dealer LPL Financial.
Rand's new firm, The Rand Group in Newport Beach, Calif., is affiliated with aggregator HighTower Advisors.
Rand and Sun said that advisers should expect the following if they go independent:
1. Gaining greater control. Neither Rand nor Sun could run their practices the way they wanted in a wirehouse environment, both said.
“It's all about control for us,” Rand said. “That's absolutely why we left.”
Although Sun is able to promote her firm using social-media channels in a way that wasn’t permitted at Morgan Stanley, Rand said that he expects to have more time to spend with clients, now that he has joined HighTower Advisors.
2. Worrying less about fiduciary conflicts. The Department of Labor’s new fiduciary rule served as one catalyst that pushed Rand and his partners to seek independence, not because they expected their fee-based business to become more compliant as an independent firm but because they expected that compliance problems could prove a distraction for their former employer.
“Just in terms of resources of them having to deal with that,” Rand said of compliance. “Now, whether that’s accurate or not, I don't know, but that was one of our concerns that helped accelerate our decision to look at something different.”
3. More to do. In a poll during the webinar, half the respondents cited the demands of becoming an entrepreneur as a top concern in contemplating independence. Both Rand and Sun said that these concerns were spot on and urged advisers not to go independent unless they are ready for big changes.
“It’s a ton of work,” Rand said. “I think the most difficult part is having been in that [wirehouse] institution for so long.”
Sun added: “We learned a lot of difficult lessons in the beginning because it was just so different [in terms of] what we could and could not do.”
4. Challenges with technology. Both Rand and Sun said they have experienced frustrations with technology in their new independent shops.
“The technology was really good at the wirehouses,” Sun said.
“I love LPL. They know I love them, but like five years ago, coming to LPL, the technology stunk, OK?” Sun said.
“And now we make do with what we can. I mean, I think that's the challenge … They're spending millions of dollars trying to improve it, but from my perspective, it's not great,” Sun said.
Sun now incorporates a range of tools from a variety of developers into her practice, including Dropbox, Google Docs and Redtail.
He found some of HighTower Advisors’ technology difficult to use.
“We've made the switch to Salesforce, and it’s been a little bit of a struggle, but we're getting used to it,” Rand said.
5. Exercising new creativity. Both Rand and Sun said that they value having a chance to build the kind of firms that they think their clients need and want.
Now that his practice is independent, Rand said that he has the chance to build a business model better suited to new investors and is incorporating new “proactive” marketing strategies.
Sun said that she is working on instituting changes that allow her clients to interact with her firm when and how they like.
“I have clients now reaching out to me via social media more so than email. It’s a substantial difference," she said.
“If you think about it, your clients don't always want to call you between your office hours … If you do it that way, you’re going to end up losing a lot of clients, if not today, then the next generation,” Sun said.
This story is part of a 30-30 series on transitions. It was originally published on July 26.