The Costs of Breaking Away: How Advisors Can Afford to Exit the Wirehouse
Leaving the wirehouse to start your own independent firm is a significant decision that should not be taken lightly. Whether you’re seeking freedom to leverage sophisticated technology, embracing your entrepreneurial spirit, or escaping corporate agendas and mandates, the transition to independence is a massive commitment that offers unlimited financial upside.
When I made the transition from the wirehouse model to independence, I gained firsthand understanding of the pressure and anxiety surrounding the move. I realized that I shared the same concerns as other advisors making the transition, most of which were tied to the financial implications, including startup costs, depletion of savings, and increased expenses that all independent advisors become responsible for when exiting the wirehouse. In this blog, I’ll break down the five key economic and financial considerations advisors need to budget for before leaving the wirehouse.
1. Startup Costs
While starting your own business is exciting and offers limitless income potential, unlike the wirehouse model, it does require startup capital, which will vary based on the number of owners/partners, employees, and the amount of client assets. Startup capital requirements can range anywhere from $50k to over $250k in order to get your independent firm up and running. However, if you partner with Kestra Private Wealth Services for your breakaway, you can reduce these capital obligations, as our full-service model covers these costs, allowing you to focus on retaining your client relationships.
2. Real Estate
Real estate is often the most expensive component of starting a new practice and a top concern, as most advisors have little experience with commercial real estate. For the first time in many financial advisors’ careers, it's an opportunity to set the tone for the firm’s culture. It’s essential to choose the space, furniture, signage, and office equipment that will best serve you and your clients for the next 5 to 10 years. Beyond property selection, Kestra Private Wealth Services’ full-service model covers your real estate costs in perpetuity and can identify opportunities for tax advantages, lease negotiation, and tenant improvement allowances so you can get the most from your office space.
3. Equipment and Infrastructure
After choosing an office space, it’s important to ensure that you’ve selected the appropriate equipment so you can hit the ground running. From equipment selection to maintenance processes, financial advisors have numerous opportunities to gain control over their infrastructure. A few vital areas to consider include cybersecurity, internet services, and site management. These decisions can be costly, but our full-service model provides and supports all your equipment needs, helping to reduce your bill so you can prioritize doing what you do best: working with clients.
4. Technology
In the wirehouse model, advisors don’t have to think twice about their technology as they utilize the firm’s predetermined tech stack. But in the independent model, advisors have the freedom to customize and build a tech stack for their specific needs. This freedom enables you to increase efficiency, automate processes, and enhance your client service experience. To help you take advantage of this newfound freedom, we provide a customizable, out-of-the-box technology platform to power your business.
5. Compliance
At the wirehouse, you likely aren’t dealing with compliance on a daily basis, but it will be an integral aspect of your independent firm, and regulations will vary based on the affiliation model you choose. In an ever-changing regulatory environment, having a robust compliance infrastructure is crucial to safeguard you and your business. In our full-service independence model, our team of compliance experts will manage all of your compliance needs remotely so you can stay focused on spending time with clients and engaging with new prospects to grow your business.
Save Big on Startup Costs and Ongoing Expenses with Our Full-Service Model
Whether you’re preparing to make your move to independence or beginning to explore your options, it’s critical that you understand the costs, ongoing expenses, and integral components of starting an independent firm. Our team of wirehouse breakaway experts at Kestra Private Wealth Services is here to help advisors like you experience the transformative power of independence and true entrepreneurship. If you’re ready to begin the breakaway process, schedule a confidential consultation with our team to learn how we can help you achieve your goals.
