What it means to be an independent advisor

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In late 2019, after over 15 years with bank-owned investment dealers, I chose to serve my clients through iA Private Wealth, an independent dealer.  Here’s what that means and why I made the change.

Employee vs Self-Employed

At bank-owned dealers, advisors are employees and the people they serve are clients of the bank.  The compensation is variable, meaning the advisor’s pay is a function of how much revenue the clients they serve generate. The bank keeps about half and provides the advisor with an office, admin support and technology.

At an independent firm, advisors are self-employed and have a principal-agent agreement with their dealer.  The clients belong to the advisors who are able to keep a higher portion of the revenue generated – in the area of 75%.  The specifics vary from firm to firm, but in most cases, the advisor must rent an office, hire support and source technologies themselves.

The difference for me was control.  The metrics around revenue and expenses were a wash.  I earn about the same as I did before, but I have a great deal more control in organizing my practice.  I chose my office location, who would support me, how much I’d pay them, which technologies I would use (such as contact management, market quotes and financial planning software).  I can structure my practice in a way that best suits my clientele and service model.

Cartoon drawing of a person asking an advisor if now is a good time to invest their money

So, you’re on your own now?”

In some ways yes, for the reasons I describe above.  But you’re never really on your own in this business.  My license is sponsored by the investment dealer – iA Private Wealth.  They provide me with the platform for managing accounts and are a custodian of my client’s investments. They also have to supervise me, which means that they approve my accounts and watch over my trades, as well as are responsible for my actions and ensure that my team and I comply with the rules, processes and procedures that protect clients.

How this benefits clients

Things are different when you’re someone’s employee.  You have to do what they want you to do.  There is nothing nefarious about it, but they have their corporate agenda.  They have a business model in mind that optimizes their resources and their profits.

When you’re self-employed, you don’t have to help anyone deliver their corporate agenda.  You don’t have to approach your client interactions with the company’s priorities on your mind.  Companies set goals to expand the services they offer, sell more insurance or certain proprietary products.  They also decide what type of clients they prefer and how services will be priced.

As an independent advisor, I just take care of clients and make a living for myself.  As a family’s trusted advisor, I can focus my attention on their needs only.  Not every client is a fit for my practice, but that is easily determined through frank conversations.  It’s much easier than juggling client needs with corporate goals.  Simply put, I now don’t have to serve two masters and my clients now have access to a wide range of services and investment solutions, supported by unbiased advice.

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