The views presented here do not necessarily represent those of Advisor Perspectives.
Advisors breaking away to start their own firm or advisory team need to ensure their personal values and mission to help clients align with their work culture.
Sandra Cho, founder and president of Pointwealth Capital Management, says that financial advisors who have gone independent but want to grow a team that aligns with their culture and values should consider developing talent in-house.
“It’s a win-win situation because that way each person is able to test the other out,” Cho said. “Also, you’re fostering a growing sense of unity between the new talent and the senior financial advisor or the institution, whether that be a broker-dealer or RIA.”
Many financial advisors who are just gaining their independence may not have the resources to hire another advisor for their team. However, bringing on someone at an admin level can allow them to nurture talent over time.
“[Can you] spend the $8,000 it takes to pay for the tech and insurance for an advisor? At least on the independent side, that can entail errors and omissions insurance, any kind of platform or resource fees, state licensing fees, the annual FINRA fee, compliance fees, and, to a smaller extent, bonding fees,” Cho said.
“If you’re hiring an advisor, that’s an investment. I can generally, after about one month, see whether someone is going to have potential,” she added.
If you aren’t ready to hire an additional advisor and take on all the associated costs, Cho says to consider hiring an unlicensed administrative person, who can get licensed after undergoing training.
“In that way, you are training them about your culture and ingraining them, and focusing them in the direction that you would like your clients to be serviced. You’re training them to the level and high standard you would like,” Cho added.
“From that point, they can become a financial advisor, but first a licensed admin. Then you can potentially make them a W-2 financial advisor, and help them service your book [of business] or smaller clients, but they are supervised as they learn the ropes. Or you could make them a 1099 employee and do a commissions split,” Cho said.
Attracting the Right Clients
To pinpoint the culture and values of your business and communicate it to prospective clients or employees, advisors need to take the time to understand their mission.
“You have to sit down and do some soul searching. What is it that you want to achieve for your clients? Why did you get into the business? And what keeps you motivated on a daily business? If you’re independent, your business becomes an extension of who you are,” Cho said.
“You’re actually self-profiling. You’re asking yourself, ‘Who am I? Why am I different? What is my goal and what is my goal for my clients? And how does that all connect?’”
She recommends that advisors be “extremely cost-conscious” when first going independent, as rushing to hire marketing professionals can “lead down a fiscally precarious road.”
“You want to talk with as many financial advisors as you can, and ask them their why. Why they got into the business. What is their value add? What sets them apart? Ask them and see how much of that resonates with you. You don’t have to reinvent the wheel. And then you can figure out what your culture is,” Cho said.
Structuring Your Business
One factor that can impact your firm’s values, and ability to service your target clients, is how you structure your business, Cho shared.
“When you go independent, chances are you are coming from a very limited-scope environment, such as a bank or wirehouse. Or maybe you were part of a smaller RIA. The first thing newly independent advisors tend to think about is, ‘how am I going to get these clients to come over with me?’ But they don’t know the best way to structure their business,” Cho said.
“You want to first think about what independent firm…you want to join. Or, do you go hybrid RIA, do you go under a home office, or do you create your own RIA? Do you affiliate with a brokerage firm? Maybe you don’t want any brokerage products,” Cho said.
Before starting Pointwealth Capital Management in 2015, Cho was an advisor at JPMorgan Chase. She wanted the ability to offer her clients an open-architecture investment platform with non-proprietary investments, which connects with her firm’s values.
“I wanted to offer as many investment options as possible and have the freedom to advise and provide my clients with whatever investment product I thought was best,” Cho said, noting this aligns with her mission of making sure anyone who needs financial advice can access it.
Danielle Walker is a freelance journalist with 15 years of business reporting experience. She previously worked at Business Insider and Pensions & Investments, among other business publications. Her work has been published in the Financial Times, Barron’s and Chief Investment Officer. Danielle is currently based in Norfolk, Virginia.
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The views presented here do not necessarily represent those of Advisor Perspectives.
