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The Hidden Cost of Comfort: How Advisors Lose by Staying at Their Current Firm

A single question hangs over many advisors with multi-millions of client assets under management, but captive at a broker-dealer: “Should I go independent?” 

Given the level of success you have already reached, it is only natural to fear the unknown risks of taking that leap of faith to independence.  But, don’t you wonder what more you could achieve without the restrictions of your current firm? 

If the answer to that question is “yes”, then you owe it to yourself to understand why for the majority of advisors, the concrete risks of transitioning to independence pale to the   abundance of benefits of starting your own practice. 

In this article, we rebalance this equation by making the true benefits of independence clear and exploring the hidden costs of lack-of-inertia for successful financial advisors. As a result, we reveal why, far from being financially prudent, the decision to stay is likely to damage your long-term net worth and your ultimate legacy.  

Expect to learn:

✅ Why over 90% of advisors who have transitioned say they have “no regrets” about their decision

How well-documented psychological biases lead advisors to overestimate the risk of independence 

What you leave on the table every day you stay at your current firm 

 

The Power of Reframing Independence  

For most advisors, independence tends to feel the best route to growth: it gives you more control over what you do, greater freedom to manage your work-life balance and a higher earnings potential. However, the desire to transition comes up against two very well-documented cognitive biases. 

The first is Status Quo Bias: a “non-rational or biased preference for the current way of doing things.” One classic study presented participants with a series of multiple-choice questions, alternately framed with or without a “default” option. The researchers found that people were far more likely to choose an option when it was framed as sticking with the default than if it was framed as a neutral “X by Y” decision – even though the decision itself was the same.

This is often explained using our second cognitive bias, Loss Aversion: a robust finding that the pain of loss is experienced as roughly 2x worse than the pleasure of gaining. Forced to choose between two options, we tend to minimize loss rather than maximize gain. 

As a result, the question “Should I go independent?” is almost designed to disincentivize you from transitioning. It positions sticking with your current as the safe status quo where the likelihood of loss is limited. But what if we reframe the question to remove these biases? 

Stop asking “Should I go independent?” and start asking, “Does staying put serve my best interests?” This simple shift can completely change your relationship with the prospect of transitioning. To answer that question, you need to understand what the real “risks” of transitioning are – and whether they are based in fact. 

 

Why Do Advisors Overestimate the Costs of Transitioning?  

The prospect of starting your own firm presents advisors with a lot of unknowns. You may, for example, fear you will be: 

➡️ Faced with lots of new tasks, from managing your admin to marketing your services. These can be scary because they are outside your domain of expertise. 

➡️ Left without guidance, having given up the corporate infrastructure that has supported you throughout your career. This can lead to a panic that you will be faced with unnecessarily difficult situations. 

➡️ Unable to access the right technology, and therefore struggle to manage various new processes or stay afloat in an ultra-competitive market. 

➡️ Buried under paperwork and lacking the time or resources to properly service your clients. As a result, there is a pervasive belief that independent advisors are at greater risk of losing clients and therefore lacking less than they did at their previous firm.  

Of course, none of these scenarios are impossible. But they are extremely unlikely to occur, based on the data. One survey from Charles Schwab’s Schwab Advisor Services found that over 90% of advisors who have transitioned say they have “no regrets” about their decision. Further, a recent study from Fidelity showed that while 60% of advisors cite “Fear of the unknown” as a primary concern, just 17% of advisors, post-move, say it is actually an issue.

Ultimately, Fidelity’s research found that 68% of independent advisors wish they had made the move sooner. The problem is nightmare scenarios like those listed above are easy to imagine, which leads many advisors to give them disproportionate weight in their decision-making. But this data suggests that these negative scenarios are vanishingly rare – and there is good reason to think they will be even less likely moving forward.  

Demand for financial advisors is rising, according to industry experts, and those that can leverage innovative technology will gain the lion’s share of that growth. Many advisors that embraced RFG’s “supported independence” model and had our team build a customized plan for their practice have grown 3x faster than the industry average. 

 

What Is Supported Independence? 

Supported independence is a model designed to enable skilled advisors to gain all the benefits of transitioning with none of the perceived risks. We provide you with: 

➡️ Expert marketing support to grow your brand and bring in more clients 

➡️ An integrated suite of wealth-tech solutions to unlock operational efficiency, pre-built workflows and technical support 

➡️ Our institutional-caliber Bluemonte platform, which offers highly customized portfolio management and direct access to the investment team 

➡️ Full transition support for 90 days, with a dedicated team to manage the project, take care of paperwork and assist you when transitioning your clients. 

➡️ Membership of a community of growth-orientated advisors who support each other throughout their journey 

 

How Much Could You Make Through Supported Independence? 

The total earnings increase you produce by transitioning will depend on various factors, such as your AUM and how quickly your business grows. However, our extensive experience suggests that an advisor with a nine-figure AUM could expect a reasonable increase in their annual take-home income.

Fidelity’s research shows that advisors anticipate a $100,000 increase in their earnings after a move. If you achieve this relatively conservative goal, that will mean staying at your current firm involves leaving nearly $281 on the table every single day. By the end of the week, you will have missed out on over $1,966. And by the end of the month, you will have lost nearly $8,334. 

Considering these numbers, perhaps we should reframe our question one more time. It is no longer a matter of “Should I go independent?”; the question is really “Is short-term comfort really worth losing out each year?” 

Want some expert support figuring out how independence could benefit you? Book a zero-commitment call with our business development team to learn how RFG may be able to help you. 

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