Comparing our four major models

Transition

Comparing our four major models

Different firms offer different options – and various levels of support and independence for those options – making it essential for you to conduct your own rigorous due diligence.

Different firms offer different options – and various levels of support and independence for those options – making it essential for you to conduct your own rigorous due diligence. In addition, regardless of the option you ultimately select, you should carefully assess the initial costs of moving and starting operations in your new capacity. Similarly, explore any recurring costs you may need to absorb or additional outlays you may need to make after you are up and running.

In addition, the economies of scale that a broker/dealer can secure mean that it may be able to offer administrative support as well as benefits – including health coverage – less expensively and more efficiently than you could on your own should you choose an independent model.


TRADITIONAL EMPLOYEE

This model reflects the way advisors have historically affiliated with broker/dealers or Wirehouse firms. As a W2 employee working in a traditional branch setting, the financial advisor typically receives high levels of support, benefits and resources – without the administrative responsibilities that independents assume. The tradeoff generally is a lower gross payout than other business models, since the broker/dealer retains a portion of the advisor’s fees and commissions to cover many, though not all, of the advisor’s costs of doing business. A traditional employee works in a branch with support staff, all under the supervision of a branch manager.

INDEPENDENT EMPLOYEE/QUASI-INDEPENDENT

This business model combines some features of traditional employee status with a level of autonomy similar to that of independent contractors. (See “Independent Contractor/affiliated franchise.”) This model allows more independence with regard to decisions on office location, staffing and managing day-to-day operations, but still draws on the firm’s administrative support services such as human resources, compliance, payroll and technology. Compensation is based on the net profitability of your office and gross payout is higher than at traditional full-service firms.

INDEPENDENT CONTRACTOR/AFFILIATED FRANCHISE

Independent contractors generally receive higher payouts than do financial advisors in employee business models. At the same time, however, they have direct control over all resources, operations and costs associated with running their businesses, such as office leasing, equipment and staffing. For access to the many resources and products available to traditional employees, independent advisors typically affiliate with a broker/dealer and pay for needed services on an à la carte basis.

INDEPENDENT REGISTERED INVESTMENT ADVISOR (RIA)

RIAs are typically most suited to money managers, financial planners and investment management consultants wishing to operate in a fee-only environment. RIAs may use discount brokers or full-service broker/dealers for clearing services as well as other resources. Although the support and resources available may vary greatly from firm to firm, the independent RIA is responsible for day-to-day operations such as dealing with administrative tasks and ensuring adherence to compliance. 



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