From Breakaway to Boomerang: The Evolving Trends and Needs of Financial Advisors 

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Big trends are typically easy to spot when they are happening. If you’ve been keeping up with the wealth industry news this year, it seems not a day goes by without an announcement of another merger or acquisition in the RIA industry. Similarly in the previous decade, the stories that carried the day were of advisors breaking away from the big wirehouses in search of independence. We believe these trends are related and part of a phenomenon we are calling Breakaway to Boomerang, and to understand it better, it helps to explore the journey many advisors follow as they go through their career.        

Most advisors begin their career working at one of the large wirehouses or broker dealers, and with good reason. These firms provide the support and training required to learn the intricacies of a highly regulated industry. Backed by strong investment teams and distribution networks, the rich legacy of these companies creates instant credibility for any advisor starting out. Most advisors have long and fulfilling careers at these firms and 55ip is proud to be a strategic partner for many of the leading wealth management enterprises in the industry.   

But every career has its own path and while all successful advisors share the common trait of having a passion for helping people solve their financial challenges, they also value freedom, flexibility, and control. They are all in fact, no matter what advisor channel you sit in, entrepreneurs at heart.   

It is this entrepreneurial drive that spurred the breakaway trend, where advisors have been steadily transitioning away from the broker-dealers and wirehouses they typically start their careers with and heading toward independence. This trend is only bound to continue as Cerulli Associates anticipates hybrid and independent registered investment advisor firms (RIAs) will have 31 percent of the market share in three years, up from 27 percent in 2022.  

The desire for independence…  

Every breakaway advisor has their own reasons for wanting to make a change. Perhaps it was… 

  • Feeling constrained by the firm’s priorities and limitations on product offerings 
  • Wanting more autonomy in their work-life balance and in their marketing and prospecting activities 
  • Desiring a greater percentage of the compensation pie 

Regardless of the reason they chose to breakaway, the common theme is a desire to do things their own way, create a legacy and make a difference. To stand out from the crowd and differentiate themselves, advisors first need to determine what kind of practice they want to run. There is a myriad of ways to position your practice through specialization. Using investment management philosophy as an example, the two extremes are: 

  • Rep as PM Advisors – Financial advisors that specialize in doing their own research and creating bespoke investment strategies for each of their clients. 
  • Financial Planners – Advisors that utilize an OCIO approach and rely on off the shelf or customized models to create efficiency and scale so that they can focus on personalized financial planning. 

With the decision made, the work begins, and there is much that needs to be established from legal and compliance, custodial relationships, trading platforms and investment management solutions. Thankfully technology exists to support breakaway advisors. In fact, it’s advances in technology that is likely the reason so many advisors made the leap to independence. 

Since our founding in 2015, 55ip has helped many breakaway advisors on this journey with our ActiveTax TechnologySM platform. 55ip’s trading and rebalancing supports both taxable and non-taxable client accounts and our integration with major custodians provides direct connectivity and oversight into trade management. Combining this operational support with strategic partnerships from a curated list of leading asset managers, 55ip provides robust solutions for any advisor starting out on their own. 

The Grass isn’t always greener… 

Some advisors who make their move to independence land exactly where they want to be after performing a lengthy due diligence process and following their gut feeling. But many advisors who jump from a big-name broker-dealer to create their own firm or join an independent shop, big or small, realize after a few short years that they love part of their newfound independence but don’t appreciate wearing hats like operations manager, human resources supervisor, and compliance officer. Others looking for a succession plan to either cash out or carry their legacy forward also need a solution and it’s for these reasons we are seeing the growing trend of M&A activity in the industry.   

These advisors choose to boomerang and join a larger RIA or an aggregator that will allow them to offload many of these mundane tasks in favor of focusing on client service.  

These boomerangers have experienced centralized services early in their career but have also gotten a flavor of independence – determining what services they can offer in-house, becoming their own public relations officer, managing administrative tasks, etc. Now they want the best that both worlds have to offer – the freedom to be the fiduciary advisor recommending the most well-suited investments for their clients and the benefit of a company that can provide the support they need.    

Serving the Breakaway, Boomerang and Broker-Dealer  

Regardless of where an advisor lands, it’s important for the money in motion to get to its destination expeditiously. At 55ip, we plug in wherever advisors are doing business.  From small independent advisory firms to large institutional wealth management firms, we’ve proven to be many advisors’ total practice accelerator by powering efficiency. No matter the flavor of independence an advisor selects, we can help transition assets quickly, while utilizing a systematic approach to tax-loss harvesting that can help lower the tax liability that comes from switching investment strategies. Both advisors and the new firm can realize greater enterprise value faster, allowing advisors to deploy the tax-smart investment solution that works best for their client.  

We also have educational and prospecting tools to provide advisors with opportunities to scale their businesses. Partnering with 55ip lets advisors focus on the most strategic aspects of their practice by outsourcing functions such as tax management, portfolio rebalancing and trading while the advisor still manages the relationship-driven decisions. No matter what type of career path an advisor chooses, or what new trends drive the industry, 55ip will be their helping break down barriers to financial progress. 

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