The first fluttering of a mass migration away from wire houses has begun, and it’s not only the investors who are taking flight. Savvy advisors are also flocking toward a new generation of broker-dealers that let them choose what clients they serve and what products they sell.
An interesting exodus made the headlines early last year. Wire houses (as full-service broker-dealers are known in the trade) were hemorrhaging financial advisors, and not just the lower performing ones either. These FA’s were being drawn toward independent practice, driven from the big firms by among other things, the need for higher income and more say over how to best meet their clients’ needs.
It’s a shift which is only gathering pace. The twin drives of seeking greater profit and independence are healthy not only for the migrating FA’s, but for investors as well. Advisors who offer more products, solid returns, and more personalized service are precisely what investors need.
Independence provides the ideal investment architecture
Financial institutions are constructed in one of two ways. They’re either closed, or they’re open. Wire houses operate under the closed model, meaning they can offer only proprietary, in-house investment options to their clients. These often come with two attractive elements for new investors. First, there’s a sort of knee-jerk confidence that such a big firm must know what they’re doing. Second, closed investments tend to be competitively priced since there are no middlemen in the distribution channel.
While working independently may present investors with higher initial costs, it also enables advisors to offer best-in-class products which may more than make up for those costs with higher yields. This kind of flexibility fuels diverse investing and diversity is investment’s golden rule, a fact we expand upon in our blog on risk management.
While independent FAs often have access to in-house products, there will be no pressure to sell them over products they deem better for their client.
Superior client service comes from independence
Many advisors leaving big, full-service brokerage houses were pushed out because they failed to meet quotas for selling in-house products. Many left of their own volition after concluding their employer did not have their clients’ or their best interests at heart. It’s not that they did not want to sell those products. They just did not want to be ostracized for doing what was best for their client.
At Wentworth Management Services we understand advisors are running toward new opportunities as much as they are fleeing a business model. Those opportunities include having the autonomy to pick not just products, but clients, including a broad and underserved segment of the market that may benefit much more from their services than the high net worth clients served by the full-service brokerage houses.
We understand the best RIAs are running toward being able to offer clients greater transparency, which is and should be the coin of the realm for today’s investor.
Our FinTech platform was designed from the ground up to help entrepreneurial RIAs to thrive in today’s highly regulated and technology-driven environment. We are focused on risk vigilance, optimal cooperation with regulators, and cybersecurity so our RIAs can focus on the important and time-consuming work of serving their clients, building a business, and securing their future.
We’ve covered the bases in hopes that you will call Wentworth home.
Wentworth Management Services LLC is committed to providing the industry’s best broker-dealer solution to entrepreneurially minded advisors, the custodian community and their clients. If you are looking for a home, why not contact us today to learn more about working with us.