Brokers Weigh GOING INDEPENDENT

MORE ALTERNATIVES AVAILABLE FOR BREAKING AWAY

By Bobby Hickman

Brokers who had recently delayed plans to break away from the large wirehouses and go independent are again exploring alternatives paths to go into business for themselves as the financial turmoil of 2020 fades.

“More than a third (36 percent) of brokers are open to either joining an existing RIA firm as an employee or partnering with platforms that provide technology and operations support – up from a combined 16 percent in the fall survey,” according to TD Ameritrade’s “Break Away to Independence Survey Spring 2020.” Those favoring the traditional route of launching a new independent registered investment advisory firm (RIA) fell to 25 percent over the same period, the report continued. Meanwhile, Investment News Research reported a net gain of 931 RIAs changing firms during the first nine months of 2020.

One company focusing on attracting wirehouse brokers who want to break away is Merritt Point Wealth Advisors in Old Greenwich, Connecticut. Jason Andrews, founder and CEO, said he worked at large wirehouses for more than a decade before launching his own independent company. He combined that background with experience running his own practice to create a new “plug and play” model for independent advisors.

Andrews said the number of advisors moving to the independent channel was already increasing before the COVID-19 pandemic caused brokers to delay their plans. He believes that post-COVID more people are open to discussing their options for transitioning to the independent side with him.

“We offer a modern approach to wealth management,” Andrews said. “I saw both the benefits and the pitfalls of the wirehouses first-hand. We took what I learned there and all the great things they provide and used that as a foundation. Then we added on technology, marketing, and a flexible infrastructure. It’s a fresh way to look at things: a new-age approach that I believe is cool and exciting.”

Andrews said an advisor can move from a wirehouse to Merritt Point and bring their book of business the same way they would transition to another wirehouse. They can also acquire existing books of business through the company (which also offers financing).

Advisors can then access wirehouse-level research while leveraging new technology that enhances the client experience. The company also offers support with individualized marketing, advertising, and social media activities. Third-party business development partners help Merritt Point advisors build their book and maintain client relationships. Other benefits include sign-on bonuses (depending on the size of the deal); regulatory compliance; HR benefits such as 401(k) plans and medical coverage; and potential tax savings and flexibility through 1099 income.

“We were able to create a business where you have 80 to 90% of the benefits of being independent and running your own practice without many of the hassles of day-to-day operations,” he added.

The model can assist advisors coming from both protocol and non-protocol houses, Andrews noted. Advisors employed by firms that joined the Broker Protocol agreement can more easily switch firms or go independent than those working at non-protocol firms. They can also contact their current clients who may wish to follow the advisor to the new firm.

“Since we are affiliated with a protocol firm, any advisors that join our practice would also become protocol,” he said. “There are plenty of advisors moving from protocol and from non-protocol firms. As long as you're following the rules, we don't see that as an issue.”

In my experience, one reason advisors are leaving the large houses is the way technology has dramatically changed the industry, Andrews said. Ten to 20 years ago, he said, wirehouses were the only institutions that could provide the necessary infrastructure, research, and proprietary products required to meet client needs. Today, technology makes those features readily available to smaller firms.

“For many of the advisors I talk to, support staff is another major issue,” Andrews continued. “They don't get to hire and choose their own support staff, and the size of the staff is usually mandated. I've spoken to advisors who are growing their business so quickly that they can't get support to open the accounts fast enough. We can help circumvent that issue because providing quality support staff is one of our major focuses.”

Succession planning provides another advantage for the Merritt Point approach, Andrews continued. As advisors get older, some houses are setting the time frames when they must leave the company. He said his company offers more flexibility for advisors to decide how and when they will turn over clients to their successors.

Andrews said Merritt Point will have eight financial advisors by early 2021. The three-year goal is to reach 25 advisors and at least three more offices. By the end of the decade, he hopes to reach 100 advisors in at least five offices – primarily in the New York metropolitan area, plus possibly Florida.

“Not everyone is going to be the right fit for us, and we're not going to be the right fit for everyone,” he added. “We're looking for the right type of people who want to grow with us. It might be someone considered to be on the lower end for a wirehouse, and who thinks they can grow through social media or book acquisition or financing. I believe that provides the benefits for us, for them, and for their clients.”

For more information on Merritt Point Wealth Advisors, visit merrittpointwealthadvisors.com/for.advisors

Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Merritt Point Wealth Advisors is a separate entity from WFAFN. CAR-0121-03267 Ad