In the ever-evolving landscape of wealth management, financial advisors are constantly looking for ways to grow their business, increase their pay and increase their business value – all while protecting their client relationships, adhering to regulations and using relevant technologies and skills. Additionally, advisors also want control over their practices, the ability to make business decisions, and the ability to monetize their hard work. It's certainly a tall order.
This “I deserve to have it all” feeling has led to a shift of more advisors going independent. In fact, the independent channel's market share is expected to reach 42% by 2028, up from 34% in 2018, and nearly 70% of all advisors say they would prefer to be affiliated with an independent firm if they would change the firm. (Based on Cerulli's 2024 BC Market Report and Cerulli's 2023 Retail Advisory Investor Relations LPL calculations.)
It's no secret that advisors often turn to independence for payouts that can reach up to 100% and more control over their book of business, value proposition and legacy. With independence, advisors can set their own vision and growth goals while setting the tone for their firm's culture and client experience. In fact, at one end of the independence spectrum, advisors are responsible for selecting, securing and building their own real estate, designing their new brand, creating their own technology stack, undertaking risk and compliance, underwriting for their business and providing options to employees and eventually managing a group of third-party vendors or managing an ever-expanding back office staff.
For some, this freedom to build and control every aspect of their business and ownership feels like what they were always meant to do. For many others, this ever-growing list of responsibilities can become overwhelming.
Raising “Supported” Independence.
In my role, I'm often asked, “What are my options when I know I want more control, but the thought of doing it all myself makes me feel stuck?” It's a great question, and it gets to the heart of this shift in the definition of independence.
This desire to find an alternative path is fueling advisors' interest in supported independence—a subset of supported options from larger firms that provide varying levels of back-office support such as compliance, technology, marketing, and more. many for consultants and independent firms.
Supported independence is not just a trend; is a strategic shift enabled by advisors who are redefining what it means to chart your own path in the wealth management industry. Supported independence can take many forms, including:
- Independence with basic support: Advisors who want the benefits of a platform that brings together core operations, servicing, technology, investing and trading with the ability to add support when and where they need it.
- Independence with a support network: Advisors who appreciate being an owner and operator but want a guided journey and are eager to join a community to share best practices.
- Independence with personalized support: Advisors looking for tailored guidance, hands-on execution and premium support to help optimize their time and advance their business.
- Independence as an employee: Advisors on this path seek independence without the burden of running a business. This unique relationship gives advisors the ability to outsource things like real estate, technology, operations management and support, benefits and payroll. This taste of independence gives advisors all the benefits of independence, including book ownership, while letting them take advantage of the benefits of W2 employment.
As the industry expands to address the increasingly diverse needs of the independence movement, a whole new segment of advisors can visualize their independent future.
How to make it happen
No two entrepreneurs' visions are the same, and fortunately, the range of options has evolved to meet the diverse needs of advisors. A great way to start the due diligence process is by asking yourself what elements of business ownership excite you, worry you, or make you think, “I'd rather be doing something else.” Using this list to verify your options allows you to focus your energy on the offer that checks all the key boxes.
Here are some areas I encourage you to focus on as you begin your due diligence search:
Risk management: If the past few years are any indication, regulations will continue to evolve in scope and complexity, and market volatility will continue to attract investors. This might make you wonder if becoming your firm's chief compliance officer and taking on the risk of starting an RIA will be too much on day one. If so, look for a partner that can help mitigate the risks associated with compliance, legal issues, and market volatility.
Efficiency and scalability: Growth-minded advisors often seek the support of a larger firm to help them scale their practice with less risk through access to additional capital and resources. Different models of independence can offer different levels of liquidity and capital, so spend some time matching your business growth objectives with what's available. In addition, supported independence options often come with access to technology aimed at improving efficiency and service delivery, which can be a significant advantage in a competitive market.
Work-life balance: Work-life balance is increasingly important for advisors, especially for younger generations. Having this balance can be a boon to current advisors and a strong recruiting tool for growth. When evaluating a change, think about the transition and ask yourself if you can imagine your work-life balance really working for you or if you would benefit from the administrative and operational support of supported independence.
Defining your next chapter
How you choose to evolve your business is a personal decision and no two advisors are the same. The most successful advisors follow industry evolution and adapt business opportunities to their desired level of entrepreneurial independence, which may change at different stages of life and business.
That's why your chosen partner should have the ability to guide you through the entire life cycle of your business, from start-up resources to growth to succession planning and the eventual sale of your business. There is tremendous power in waking up each day knowing that you have the power of choice and the right partner in your corner.
Kimberly Sanders is Senior Vice President, Independence Support, at LPL