Thanks to new technologies, financial advisors have more opportunities now than they once did. Like most industries, financial advisors and their clients have adopted virtual business practices over the past year, and clients continue to adopt and request convenient access to their account and performance information. So with these opportunities, independent advisors and RIA practices are challenged with providing these tools, along with the necessary cybersecurity procedures, that often come with a hefty price tag.
A breakaway advisor, also known as a breakaway or transitioning advisor, is a financial advisor who has joined an existing Registered Investment Advisory firm. In doing so, they can operate as their own business without dealing with all the headaches and the expense associated with starting a business from scratch. This is one way to gain efficient technology systems for today’s growing practices. With the right partner, advisors can gain not only the client-facing technology, but also back- and mid-office technological support for functions such as client relationship management, trading, portfolio oversight, as well as miscellaneous administrative tasks like billing.
The opportunity to become a breakaway advisor has become more and more appealing to financial advisors, which is why the number of breakaways is at a record high. Last year TD Ameritrade released their Break Away to Independence Spring 2020 Survey. The results found that 40% of advisors have plans to leave their brokerage or wirehouse in the next year!1 As a result, there are more breakaway advisors joining RIAs, and they are continuing to advance in their careers because of new technologies.
There are several reasons as to why a financial advisor would want to join an RIA, like a higher payout and greater autonomy. And although still swaying factors, they are no longer the most attractive piece. Technology is what is attracting many breakaway advisors to join an existing RIA. According to the survey, 36% of brokers are open to joining an RIA that provides tech platforms and operational support. This technology makes the transition smoother for both the advisor and their clients. According to the study, 80% of advisors say the process of transitioning to an RIA was much easier than they expected, with 72% retained all the clients they wanted to.1
If a financial advisor were to go out on their own completely, rather than associating with an existing RIA, they would be responsible for a significant amount of technology on top of managing client and referral source relationships and building a pipeline of prospects, which is really a financial advisor’s best use of time. And not just any tech either! The industry and nature of this work requires leading software, streamlined integration and automated processes. Implementation, training and ongoing software maintenance is both time-consuming and expensive. The TD Ameritrade survey had found that 33% of advisors are looking to join an existing firm rather than start their own.1 Advisors with current clientele don’t want to spend their precious time installing software and various tech systems; they want to focus on growing their business. When they are able to plugin to the existing technology platforms of an RIA, they can do that.
Upon associating with an existing RIA, breakaway advisors can gain access to industry-leading software. Another key benefit can be adopting existing turnkey processes in various areas, including compliance oversight, trading, account maintenance tasks, billing and various client experience touch points. This benefits the breakaway advisors’ clients in two ways:
First, they have more time to focus on their customers. This makes your clients happier, and with satisfied clients, you are more likely to increase referrals and grow your business. The second way clients can benefit is with a client portal. When joining an RIA with a solid technology platform, your clients may also have access to an easily accessible client portal where they are able to review statements, account activity, and balances. Again, this leads to greater client satisfaction.
Breakaway advisors must also consider information security as well as technology that will protect their client’s sensitive information. In the current environment, breaches and scams are on the rise for financial institutions. This is a top priority and concern for regulators as well as clients. Clients need to be able to trust that their financial advisor’s technology will keep their private information secure.
Before transitioning, breakaway advisors must find an RIA with a robust technology system they can count on. A firm that has implemented secure systems and safely transfers information. Further, by joining an organization with a dedicated technology team supporting the backend, you, as the advisor, don’t need to spend time on troubleshooting and maintaining various systems.
If you are an advisor and considering making a move to a breakaway advisor, advanced technology and platforms are a vital piece of the puzzle. Joining a firm that provides you with access to software and technological processes for trading, compliance, billing, and account maintenance is necessary for growing your business and customer relationships.
At Fragasso Financial Advisors, an existing RIA, breakaway advisors are provided with leading technology systems and support. The award-winning firm consistently takes a client-centric approach and understands the critical role technology plays in serving clients. Additionally, their associated advisors are provided with resources for client experience, financial planning, operations and compliance, in-house portfolio management, marketing, financial education, business consulting, and retirement plans.
With an increasing amount of advisors looking to breakaway or established RIAs looking to jumpstart their growth, technology will be the main differentiator when advisors decide where to partner. This is not a decision to be taken lightly, and a due diligence process should be completed by you as well as the RIA. Using Fragasso as an example, they have an established due diligence process that entails reviewing your book of business, a reputational review, background check, existing technology systems and compliance history.
Both you and the RIA will need to determine data migration, integrations, and system compatibilities, as well as all things related to technology, including software, hardware, and security. This process takes time, usually about 12 weeks, but statistics are showing that breakaway advisors are finding it’s well worth the effort. If you and the RIA come to an agreement, you’ll begin the onboarding process and be on your way to the highest and best use of your time, and ultimately growing your practice.