Advisors are faced with many important decisions when looking to go independent, each of which provides an opportunity to find an ideal fit for the next steps of their business. These decisions can be crucial to future success, but when it’s time to consider where to go, a little due diligence goes a long way.

The breakaway process has come a long way in the past 10 years, according to Sean Keenan, director of business development for BNY Mellon’s Pershing. Back then, breakaways “were looked at as renegades and mavericks who were jumping into this new world and taking on risk.”

Keenan compares that with today, where firms managing anywhere from $100 million to $10 billion “are lifting out of a restrictive environment and they’re moving into a custodial independent relationship.”

Pershing provides custodial services and consulting teams to help newly-independent RIAs with transition support, an open architecture platform, comprehensive wealth solutions and flexible technology.

No two breakaway circumstances are alike, but similar trends and patterns emerge during the process, says Mike Papedis, CEO and founder of Fusion Financial Partners. Fusion provides consulting services for RIAs, including business growth strategy, technology architecture, team building, resource allocation and vendor due diligence and selection.

“This business that we built with 13 people and had underwritten a great deal out of our pocket, none of it was really ours.”
Margaret Dechant
6 Meridian
Papedis says a new home "could mean a merge with another entity, it could mean joining a platform or an independent, or it could mean going alone and launching their firm."

The first step to a successful breakaway for any advisor is to find the appropriate home for their business. Here is a closer look at two popular options and how one team mastered its breakaway.

Setting Up Shop: The Standalones

For the independently-minded, entrepreneurial advisor or team, running the whole show as an RIA might be the perfect fit. Going this route is akin to starting a small business, requiring an attention to detail not for the faint of heart.

Margaret Dechant, CEO and founding partner of 6 Meridian, points to an underlying truth that led her team to opening its own shop.

“This business that we built with 13 people and had underwritten a great deal out of our pocket, none of it was really ours,” she says. This desire for ownership of what they had created inspired the team to explore their options.

Advisors launching their own shop will find every decision from soup to nuts now on their shoulders. Such responsibility goes far beyond business-related decisions, like what software and communications systems the firm will use. Advisors must also find office space, set up bank accounts and payroll systems, and create a name, logo and letterhead — not to mention phone systems and a website. A thorough due diligence and delegation strategy will make it easier to ensure the new worksite is viable, and the team can conduct business from day one with seamless ease.

Tucking In: Independence With Less Risk

Advisors or teams ready for independence but who prefer more of a safety net might consider porting over to a larger, more established firm through what is known as a "tuck-in;" joining forces with an already-established firm with strategies and support systems already in place.

Tuck-ins work well for advisors who could opt for a standalone entity but have reasons to not want the full-fledged independence route. Tuck-ins appeal to advisors and teams that don’t want to reinvent the wheel and start from zero, or small firms without the scale or resources to craft their own infrastructure. Tuck-ins rely on the guarantee of established technology, infrastructure, and systems from day one.

The relative simplicity of this process is ideal for many breakaways, according to Charles Cornett, director of business development at BNY Mellon’s Pershing. Cornett says tuck-ins reduce risk for advisors because the firm they are joining knows what they are doing: "They provide all these different sources of value. And [the advisor] may or may not use them all, but they’re going to have them at their disposal."

Choosing the Adventure: One Team’s Story

For some, the road to independence is more of a zig-zag than a straight shot. Seven years ago, Wesley Kaufman and his small team knew they were ready to take the leap after nearly two decades at a wirehouse. Yet, after assessing their options, they didn’t feel ready to assume the risk of starting a business from scratch. After deliberation, the team chose instead to tuck in with another firm — a move Kaufman refers to as "independence with training wheels."

"We went independent to a place that was sort of like what we knew, but it gave us a level of independence," Kaufman says. "We learned how to be an independent entity and what that really meant."

Eventually, Kaufman’s team felt ready to take their next step and embrace full independence. In June 2019, Heartwood Wealth Advisors flipped on the lights and started doing business as a fully independent entity, with Kaufman as founding partner. Kaufman is glad to have taken advantage of the stepping-stone opportunity with his team, which has grown to nine members from six since first breaking away from the wirehouse.

"In both instances, we’ve had no regrets," says Kaufman. "Changes can be uncomfortable, but both times we got to the other side and [realized] the best decision we made was to keep going down this path."

© 2019 Advisor Solutions. Advisor Solutions refers to the brokerage services business of Pershing Advisor Solutions LLC and/or the bank custody solutions business of BNY Mellon, N.A. Pershing Advisor Solutions LLC, member FINRA, SIPC, is a subsidiary of The Bank of New York Mellon Corporation (BNY Mellon). Clearing, brokerage custody or other related services may be provided by Pershing LLC, member FINRA, NYSE, SIPC. Pershing Advisor Solutions relies on its affiliate Pershing LLC to provide execution services. Bank custody and private banking solutions are provided by BNY Mellon, National Association (BNY Mellon, N.A.), member FDIC, a wholly owned subsidiary of The Bank of New York Mellon Corporation. Pershing LLC, Pershing Advisor Solutions LLC and BNY Mellon, N.A. Bank Custody Solutions do not provide investment advice. Affiliated investment advisory services, if offered, are provided by Lockwood Advisors, Inc. (Lockwood), a Pershing affiliate and an investment adviser registered in the United States under the Investment Advisers Act of 1940. For professional use only. Not intended for use by the general public. Trademark(s) belong to their respective owners.