Are you destined to go solo?

Some rock stars were simply destined to go solo. Some financial advisors too.

Peter Gabriel, for example, attained musical superstardom on his own unique terms after leaving Genesis. The theatrical prog-rocker took a step back in the wake of his departure from the successful group, playing humble clubs under his own name before eventually graduating to stadium shows worldwide.

David Lee Roth, on the other hand, could never seem to shake his association with metal gods Van Halen. The flamboyant front man flamed out on his own and ultimately rejoined his former bandmates for reunion albums and tours.

Still, Diamond Dave deserves all the credit in the world for his stab at independence because going it alone – to steal a line from a solo Ringo Starr hit – “don’t come easy.” Not for a massive rock star on their own or a financial advisor departing a powerful and storied wirehouse.

MULLING THE MOVE

Jeff Brown, president of Stratos Private Wealth, had several reasons to leave his wirehouse employer and go RIA. The first was the authority to grant and sell equity in his practice to other team members while controlling the legal aspects of the equity transfer. Next was the ability to take advantage of alternative technologies in areas like contact management, video conferencing, financial planning, and productivity. 

Finally, just like Gabriel and Roth, he wanted to build his own brand despite all the challenges that entailed.

“We wanted to be able to have more control over our branding, messaging, online marketing, and investment solutions,” Brown said.

Shari Burnum, CEO and financial advisor at Investor’s Resource, led a team at one of the nation’s largest independent non-wirehouse firms as an independent contractor for nearly 20 years. In that regard, she was used to making her own decisions and being her own boss.

Her decision whether to break free really came down to her fundamental belief that her job “is to deliver advice, not sell them a product or account solution.”

Stephen Ruvituso, CEO and founding partner of SYKON Capital, meanwhile, celebrated the first anniversary of his firm’s independence this past June. SYKON Capital is built on a foundation of behavioral finance, helping clients identify and manage risks they often did not realize existed.

Leaving the comfort of a larger firm clearly provided its own risks, according to the forward-looking Ruvituso. But the benefits were obvious as well.

“Over a decade ago, we identified a major shift taking place in the investment landscape and adopted innovative approaches to ETF portfolio construction, especially in fixed income,” said Ruvituso. “Similarly, the decision to create SYKON was born from the identification of a trend focused upon providing unparalleled value to our clients through the independent wealth management market.”

EXIT STAGE RIGHT

Perhaps unlike the world of rock and roll, most financial advisors don’t suddenly break loose from an organization because of sex, drugs, or the unfortunate passing of a founding member. But money and power struggles are commonplace in both businesses and often lead to a breaking point.  

For Jeff Brown, that final straw was reached when he was forced to change his CRM to one that the firm was building. 

“The interface was weak at best and the logic behind building something rather than use Salesforce or some other leading firm was yet another example of decisions being made by people that were not advisors for advisors,” said Brown. “We wanted to build a practice that was advisor-focused, which ultimately would result in a more client-focused practice.”

Burnum describes the circumstances behind her final break-up as a “discrepancy between myself and management.”

“The firm was a different firm when we left than when I joined 20 years prior. That is truly unfortunate in some ways, but that is sometimes the price to pay for growth. Our move launched us into a much better place,” said Burnum.

As for SYKON’s Ruvituso, he believed the bloated, slow-moving wirehouses needed rewiring from a technology standpoint. And he had no interest in sticking around as they inched toward the best technologies that would propel his business and care for his clients.

“While there was no one particular straw that broke the camel’s back, so to speak, it was the reality that the wirehouse world could not keep up with the pace of innovation required to bring clients the services and additional value they deserved,” said Ruvituso.

START ME UP

Besides the obvious items like bringing all their clients over, re-entering data from scratch, and learning new systems, one thing Jeff Brown did not expect would be a challenge when starting Stratos was an item he was actually looking forward to: m choices. 

“The number of options in everything from technology to investments to custodians and the like actually was a big challenge. So many choices!  I felt like a kid in a candy store,” said Brown. “I feel like we spent a lot of time testing all of these things out and making changes where we didn’t need to because of the ‘shiny object’ syndrome.” 

Once he realized how disruptive it was to keep testing out new things or implementing changes, Brown says he began to take a much more thoughtful approach about his “new” practice.

“We did our best to pick the best in each category and committed to using it without change for some period of time,” said Brown. 

Burnum’s challenge out of the gate was less about having too many choices and more about not having enough time in the day to communicate to clients about her decision to break away.

“We should have done a much better job in telling our clients the advantages of leaving a big-name firm and moving to a small, boutique RIA whose name was not a household word,” said Burnum. “You can’t really say much before you make your move, and once you do, the clock is ticking to move as many accounts as quickly as possible to impact business cash flow the least.”

Even with Docusign, which was already well established before she moved, Burnum said her team had a lot of requests for paper forms and a lot of questions around where the assets would move.

“I was surprised that while we understood the concept and advantages of a multi-custodial, independent firm, clients were slow to understand why they had to sign forms for an RIA and a separate custodian,” Burnum said.

Ruvituso says in retrospect that one of the best decisions his team made was utilizing Tru Independence as a bundled service provider and consultant to help run his newly formed RIA.

“It has provided significant operational efficiency in areas such as compliance, technology, accounting, and HR, among other key services. It’s still up to us to choose how we build our RIA, but their advice has been invaluable in these early days,” said Ruvituso.

DON’T LOOK BACK

“I am not saying that going independent is for everyone,” said Brown. “There are a lot of new things that will take time that you didn’t need to worry about before: HR, career paths, finance, technology. So it takes a true business owner and entrepreneur to embrace independence and maximize the experience.”

Nevertheless, maximize it, he did.

Brown left the wirehouse with five team members and was forced to start again from scratch. Now he leads a team of 19 with over $1.5 billion in AUM. 

“I really feel like we are making a mark on the industry and a name for ourselves. If I had just one regret, it would be that I didn’t do it sooner,” Brown said.

When asked if there was ever a point where she wished she went back to the relative comfort of her prior employer, Burnum responded without hesitation: “Not once!”

Ruvituso also continues to rock on without dwelling on the past. Since leaving their wirehouse to create a fee-only RIA, his team suspended their Series 7 licenses and let their insurance licenses lapse.

“We were never going to look back,” said Ruvituso when asked why his team performed the wealth management equivalent of smashing their guitars before exiting the stage.

“When we were researching the independent space, all the business owners that we spoke to told us we were going to wish we had done this sooner,” said Ruvituso. “Those words could not ring truer.”