InFocus: Practice Transition

American advisors create their own independence day

American advisors create their own independence day

Although certain sections of the Canadian advisory community are recognizing the benefits of going independent, industry counterparts south of the border are a few steps ahead. As a result, there is more American-centric data available on advisors who take the step to independence. A study conducted by Fidelity Investments called the ‘RIA Roadmap to Growth’ revealed the three ways in which an independent advisor can accelerate growth:

Firm structure – The study found that faster-growing independent firms are more likely to be “founded by breakaway brokers, actively adding new client and enabling growth by attempting to scale their business.”

Client base – Fidelity’s research also discovered that, regardless of their size, independent advisory firms tend to achieve faster growth when they target “high-net-worth clients; augment their client base with larger institutional clients, such as corporations, endowments, and foundations; and working with larger pension and retirement clients.”

Services and products – The study revealed that successful firms are more likely to offer “portfolio management for investment companies (Holdcos), provide small business advisory services (such as valuation, sales, consulting, or legal support) and value access to private equity opportunities.”

Based on the findings of the survey – which questioned independent advisors with at least $25 million in total assets under management - Fidelity outlined some key considerations for advisors hoping to accelerate growth and build a successful independent practice. “Explore opportunities for breakaway brokers, they bring in established client bases,” the study suggested.

The authors of Fidelity’s research study also encourage advisors to partner with accountants, insurance firms and trust companies in order to help cultivate high-net-worth client referrals and to offer access to workplace saving accounts.  “Evaluate your existing client base and focus on serving the profitable clients, while shedding the unprofitable ones,” the study said. “Prepare for the future challenges that growth can bring by focusing on staffing, back-office efficiency and scaling your business early, before business growth is stalled by such challenges.”

Significantly, the report found revealed that, during the three year period of research, nine out of ten independent advisory firms saw their assets grow and that more than 25% of firms grew by 100% or more. Firms with less than $50 million grew the fastest followed by firms with $250M+ in assets. Although they experienced the slowest growth, firms with $50M to less than $250M in assets still grew at an average rate of 50% over the three year period.

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