Do you work for a broker-dealer? The definition of a broker-dealer is a firm that buys and sells securities for its own account or on behalf of its customers and, in the U.S., usually refers to stock brokerages. If you’re familiar with my business, you know that its my belief that those who work for broker-dealers can make more money and have more fulfillment in their careers if they leave to start their own registered independent advisor business.
There are a number of differences between a broker-dealer and a registered independent advisor, the most important of which is the fee structure. A broker-dealer pays advisors on commission for what they sell, while an independent advisor, particularly those who have fee-only businesses, get paid a flat fee for their advice and consulting. When you start your own business, you get more freedom and you can serve your clients in the way you feel is best without having to worry about getting paid. Are you ready to make the move and leave your big firm for the world of entrepreneurship? If so, here are the five steps you’ll need to follow.
Step 1: Have a Plan to Leave
Simply walking out the door and saying, “See ya!” probably is not your best option. Okay, it’s definitely not the best option. It’s always best to have a plan in place that hopefully involves taking as many of your clients with you as you can. This takes time and you’ll need to watch what type of products you’re selling your clients now as some of them cannot transfer to your new business. Sit down and come up with a detailed plan, date for when you want to leave, and everything that needs to be done before you resign.
Step 2: Have Your Contracts Reviewed
The last thing you want to do is leave your broker-dealer, start your own business, then get sued by your previous employer. Have a business attorney take a look at your contract with the broker-dealer before you leave. Are there any clauses that could be troublesome if you start your own gig? How can you address them now before you take the leap? It’s always best to be proactive rather than reactive in this situation.
Step 3: Build Your Business Plan
You want to set yourself up for success from the beginning as an RIA, so build your business plan now. If you’re not sure how to write a good business plan, work with a business coach or take our Evolved Advisor course for help.
Step 4: Confirm You Have the Proper Licenses
If you are starting your own independent, fee-based firm, you likely won’t need a Series 7 license as this is for selling stocks and receiving commissions for those sales. What you’ll need is a Series 65, which is a license that allows you to act as an investment advisor to your clients. When you have a Series 65, you can be a counselor and partner with your clients to not only help them make the best financial decisions, but also to navigate other areas of their life to help them achieve an overall high level of wellbeing.
Step 5: Build a Launch Strategy
Do you know how you’ll launch your new business once you leave your big firm? Having a set launch strategy in place will give you peace of mind and a roadmap to follow in the crucial early days of your business. Among the issues you need to consider are how to explain your fee structure to clients, how to attract new prospects, and what your new office space will look like in terms of being traditional vs. more flexible and based at home or virtually.
As an entrepreneurial advisor, you have the freedom to serve your clients in the way that is best for them and for you. When you follow the five steps we recommend for leaving your broker-dealer, you can start your new venture off right and build a legacy you can be proud of. Have questions or want to learn more about setting yourself up for success in your new gig? Reach out, I’d be happy to help!