This is Part 5 of Financial Advisor IQ’s five-part special report on how financial advisors can break away from their brokerages.

There are pros and cons to just about every situation, but when it comes to advisors breaking away to start their own firms, it seems the grass really is greener on the other side.

There were 655 breakaway deals in 2019, a 22% increase from the previous year, according to Echelon Partners. That pace hasn’t slowed this year. But while more advisors are breaking away every year, few go the other way.

Louis Diamond, executive vice president at Diamond Consultants, says he sees maybe one person a year who decides to go back to a wirehouse. When it happens, it’s often because the advisor wanted to be back with a big brand, perhaps because they were struggling with how to market themselves. Another reason to go back is to get away from the day-to-day of running a business and compliance.

But these situations are far and few between, according to Diamond. "The biggest thing is just kind of quality of life and freedoms independent advisors have gotten used to," he says.

More responsibility, choices

"I’m the kind of person that always wanted to have his own business," says Chuck Failla, principal of Sovereign Financial Group. Sovereign had been an independent branch IBD under Raymond James that transitioned to a fully independent RIA.

Failla made the move to become fully independent in part because he felt he wasn’t using his Series 7 general securities representative license. "I wasn’t really working as a registered rep; I was working as an investment advisor representative," he says. But he felt established enough and with a good enough team to make the switch to full autonomy.

"We’re just wanting to have full autonomy over how we run our business and the types of business practices we use," he says. Having the ability to pick and choose multiple custodians, for example, "that’s really just a super net benefit for our clients to have that ability," Failla observes.

Failla says he recognizes independence is not for everybody. "I would say the real determining factor is do you really, really want to have your own business, and some people don’t."

Freedom to focus on the customer relationship

Judith Lu, founder and CEO of Blue Zone Wealth Advisors in Los Angeles, was a partner at an RIA for about six years before deciding to spin off her practice. Being independent was a chance to focus more on the client relationship in ways she felt were important.

"Most firms are focused on performance metrics of the business. It’s a matter of getting enough AUM to being able to charge enough to generate enough so that you have enough to go out and hire more advisors or to grow your business. There is this constant focus on volume … to the detriment of quality," she says.

That pressure was at odds with Lu’s focus on quality. "I’ve always believed that if you bring a level of quality and consistency to your conversations with your clients that it will get more business," she says. But her approach was at odds with traditional growth metrics.

Since breaking out on her own, Lu says she’s been able to focus on quality and seen client assets grow faster than ever. Looking back, she would never have chosen to start a business amid a global pandemic, but as it turned out, the crisis deepened client relationships, working in her favor. Although she has fewer clients than before, the clients she does work with raised her client assets by 30% in the first 10 months, she says.

Lu likens the difference between the business model of most financial firms and that of her practice to the contrast between selling Volkswagens versus selling Bentleys. The financial services industry is focused on sales volume, Lu says, but "it’s an inferior model because as an advisor, you only have a certain amount of time every day."

Open architecture

Bryan Noonan, senior wealth advisor at Juncture Wealth, says he wasn’t really looking to leave Edward Jones, but when the opportunity came up to join a strong team he respected, he knew he didn’t want to turn it down.

After working at several established firms, Noonan was starting to notice restrictions that made it hard to do everything in the client’s best interest. "Any large organizations are going to have their ways of doing things," he says, but sometimes that can mean losing out an opportunity. One client had overseas holdings he wasn’t able to help with, for instance.

Some restrictions prevent advisors from losing out on an opportunity with a client, while others can prevent clients from taking advantage of a particular situation that’s in their best interest, Noonan says. "Having that independent open architecture is a very big draw," he says.