The Independence Test

Each year a greater percentage of Financial Advisors choose to go Independent. There are over 300,000 Financial?Advisors in the U.S. and approximately half of them now call the independent model home. With over 120 Independent Firms there are many choices. It's overwhelming deciphering cultures, technologies, product?offerings, services, custodians and clearing firms, just to name a few.

At The Rummage Group, we consult with advisors daily who are considering independence, but after an in-depth?consultation, we discover many are not cut out for the independent model. We also consult with advisors who?perfectly fit the profile of independence, but never seriously considered it.

Some advisors believe going independent is all about the payout. Although this is a big part, there is much more.?Business ownership requires a certain interest level, personality type, skill-set, drive, and perseverance. Many advisors stay away from this model because they believe it consumes too much time and the net payout is?not much higher. Both misconceptions are inaccurate. The average Independent Advisor spends between 5-15% of their time running the business, and keeps about 70% of the revenue after all expenses. Some of the many benefits of business ownership are: keeping 70% of revenue, freedom, book ownership, more?retirement options, office location, décor & culture. In addition, they have more control over branding, expenses, marketing, hiring, compliance, office meetings, technology, schedule, tax deductions and fees/commissions.

It's important for advisors to know if they are cut out for Independence. If the right advisor selects this model, they will have a fulfilling life with greater happiness and financial reward. However, the wrong advisor will?experience misery, frustration and financial problems.

The biggest consideration for an advisor considering a move to Independence is how much of their book will move?with them. This can be a difficult task especially if the advisor is in the Bank Model. At The Rummage Group we?have actually created a process to help advisors determine which clients are likely to move with them. Once?you know which clients will follow you, it's simple math to project your future revenue and profit margin.

For example: if a $600k producer with $60mm in assets can move 60% of her clients, she is likely to produce $360k?in her first year as an Independent Advisor. If she takes (the industry average) 70% to the bottom line she will have?income of $252,000. The question to ask herself: can she live on this income? If so, perhaps she can afford to go independent. If not, she may have to wait longer to build stronger relationships with her clients. This will ensure more will make the move. Just because she can afford to make the move does not mean independence is right for her.

This is why we have?designed a thorough "Independent Test". This will help advisors determine if they have what it takes to become an?Independent Advisor or if they should remain a W2 employee. To get a copy of the test or to have an initial conversation about the Independence model, reach out to me at 703-435-2822. All conversations are confidential and are consultative with no pressure of making a change.