In 2011, 44% of brokers who left wirehouses landed at independent firms, but every broker has an array of options when it comes to independence.

According to Mark Elzweig, who heads a New York-based executive search firm focusing on the asset management community, going independent often means taking a modest deal in anticipation of a large future payday.

“The spread between the two types of deals is quite striking,” Elzweig told On Wall Street, calculating that an independent advisor who sold a practice could net twice as much or more than a wirehouse advisor who hands off a practice to others in the branch would pocket.

If you’re ready to make such a move, choosing the right path can be a challenge. “There are a number of pockets of growth in the independent channel,” Elzweig said.

Independent Broker-Dealers

“Large, well-known IBDs continue to be the most popular choice for advisors leaving wirehouses,” Elzweig said. “Their combination of brand-name, platforms that facilitate both fee-based and commission business, and upfront deals make these attractive destinations.”

Independent RIAs

Elzweig also has seen increased interest from wirehouse advisors whose business is primarily fee-based in the independent RIA model. “Advisors who mostly use outside SMAs or who run client monies themselves in a broker-as-portfolio manager format often feel that they don't need a broker-dealer,” he said. “As an RIA, their new payout becomes 100% minus ticket charges and other overhead.”

Independent RIAs can find expanded SMA manager choices available on custodial platforms as well as more investment freedom. “For example,” Elzweig said, “advisors who want to run client portfolios themselves find it easier to treat cash as an asset class in these volatile markets. SEC-registered advisors are not restricted to hold a maximum of 10% or 20% cash in broker-as-portfolio manager accounts, as are FINRA advisors. Some RIAs even run hedge funds on the side, away from their custodians.”

RIAs Affiliated with a Broker-Dealer

Hybrids are another fast-growing area, Elzweig asserts. “Advisors can be SEC-registered and operate their own RIA, yet do so while enjoying the support of a broker-dealer. Their broker-dealers handle their compliance, practice management and succession planning.”

Independent Broker-Dealer and RIA Employees

These advisors work for independent firms, unburdened of the responsibilities of running a business. They can focus their efforts solely on client-facing activities. Payouts are lower than those of pure independent contractors, Elzweig points out, while investment freedom may be restricted.

Special Situations

Elzweig named some creative business models in the independent channel that may emerge in the next few years:

Equity Stake

Here, advisors join an independent firm with a multi-custodial platform where they receive an upfront recruiting package and an ownership stake. Elzweig cites Hightower as an example.

Platform Partners

Another example mentioned by Elzweig is Dynasty Financial Partners, which serves as a platform for advisors, helping those advisors choose and negotiate deals with custodians.


“These serial acquirers purchase all or part of an independent firm’s free cash flow for a multiple of the firm’s EDITDA,” Elzweig said. “Some provide multi-custodial platforms with marketing, technology and other support.”

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