Some industries offer clear career paths. You start with an entry-level position, move up the corporate ladder, advance to executive management if you’re qualified, and then retire with a nice pension or 401(k) plan. That is not the typical career path of a financial advisor.
Financial advisors have multiple employment options, from the moment they enter the field until the time they either retire or sell their practice. During that journey, FAs sometimes choose to change their business model. In today’s article, we’ll consider the following career paths for advisors:
- Independent RIAs
- Broker Dealers
These are in no particular order, because every advisor situation is different. Choices are dictated by circumstances. As the advisory world evolves, certain business models may lose their allure. To ensure profitability and retain clients, you might need to make a move. We hope this guide helps you find the right fit for you.
Whether you’re changing broker-dealers, starting or joining an RIA, or looking for M&A opportunities, Bridgemark Strategies can help you discover and vet new firms so you can make the best choice for your needs. Contact Us
Option #1: Work for a Wirehouse
The fast-paced environment of the wirehouse world is not for the faint of heart. It’s popular with newbies because it’s a great place to learn the business, provided you put the hours in. You won’t often find a lot of collaboration among wirehouse advisors except within a particular team.
Wirehouses like Merrill Lynch compensate employees on production credits (PCS). They want you to sell the enterprise and position yourself as a strategic partner with the bank. In return, they compensate you with a percentage of revenue that ranges from 32% to 42%.
This is certainly not the most lucrative option, but it does offer job security and exposure to a wide range of financial products. It’s possible to be a holistic wealth manager at a wirehouse, but fee-only billing structures and financial planning are not services you can offer.
Option #2: Become a Bank Broker
If you’re tired of prospecting and don’t mind toeing the company line, becoming a bank broker may be the right option for you. Rather than constantly chasing new business, customers come to you.
Like wirehouse brokers, bank brokers are limited to selling only the financial products their institution offers. Compensation is typically a salary with a bonus structure that’s based on production or also as a percentage of revenue generated. The numbers can be substantial, so this is not a bad way to make a living.
It’s important to not confuse banking in this context with investment banking. They are two entirely different categories. Bank brokers work 9 to 5. Investment bankers have been known to do hundred-hour work weeks. They get paid well for it, but it’s a grueling pace.
Option #3: Become a Registered Investment Advisor
Once considered the “next step” after putting in time at a wirehouse, many advisors today are opting to go the independent route right out of the gate. Owning your own advisory practice gives you the power to call your own shots, which is perhaps the biggest advantage of being an RIA.
It’s recommended that you get some industry experience before doing this, but a solid background in business along with an education in finance is enough to get you started. Keep in mind that with great power comes great responsibility. RIAs can offer holistic wealth management, including financial planning, and operate with a fee-only billing structure if they choose. On the flip side of that, they are also responsible for paying all the bills.
Option #4: The Hybrid Model (Independent Broker Dealer)
A Series 65 is all you need to become a financial advisor. Adding a Series 7 license gives you the ability to sell commissionable products like annuities and mutual funds. Unfortunately, you cannot use that license if you don’t have a broker dealer affiliation.
Independent broker dealers like LPL are popular because they offer the best of both worlds. Advisors are independent business owners, but they are also part of an organization that supports them and gives them the ability to earn commissions.
If you choose this route, research broker dealers thoroughly before agreeing to come on board. Some BDs have restrictions on fintech, prospecting methods, territories, and advertising. Review all of these to make sure their model fits your needs.
Timing Your Decision to Make a Change
Simply being unhappy with your current situation is a good reason to contemplate change, but it’s not the only reason to pull the trigger. Your clients’ needs must come first. Ask yourself if the firm and direction you are considering is right for them too.
Once you’ve made the decision to go, take the transition one step at a time. If you’re working for a wirehouse or bank and going independent, there are rules about how you can notify clients about the move. There may even be non-compete clauses in your current contract.
What’s Your Next Move?
Change is hard, and this is a major life choice. For best results, consult with a professional before you begin your search for the right “landing spot.” Our team here at Bridgemark Strategies can help. Reach out to us today to learn more.
At Bridgemark Strategies, we are leading financial advisor recruiters and consultants serving Financial Advisors, RIAs, and Broker/Dealers nationwide. If you’re considering a transition, we can leverage our vast network and experience to help you discover and vet new firms so you can make the best choice for your needs. Contact Us