A big advantage that the entrepreneurial advisor has is being more of a peer to their business-owning clients. That's one of the take-home points from this article looking at the benefits ownership in the wealth management sector.

Wealth industry advisors can do more for their clients if they become business owners rather than just employees, so the author of this article, Kevin McFarland, argues. 

The editors of this news service are pleased to share this article with readers and invite responses. We hope it prompts debate; the usual disclaimers apply. Email the editors at tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

Becoming an entrepreneur rather than an employee is a big step for any advisor to take. It certainly was for me. But when I made that decision, I knew it was the best thing I could do for my personal development, but more importantly, it was the best thing I could do for my clients. 

That last statement may sound self-serving, but it’s true. As the owner of my business I am not beholden to some bank or brokerage house. My clients are the only people I have to answer to, and that’s a great position for an advisor to be in. The biggest advantage that entrepreneurs have is that they have a world of choices open to them. For advisors that means choosing where you want to work, who you want to work with and how you want to serve your clients. And for clients it means a lot more choices when it comes to creating a long-term financial plan that can help them realize their dreams.

Granted, entrepreneurship is not for everyone and there are lots of reasons why advisors choose to remain someone else’s employee. But the comfort of a corporate office and a regular paycheck may come with a lot of restrictions and frustration. On the other hand, financial professionals who embrace the idea of independence and become entrepreneurs are able to take control of their own destinies.

Because independent entrepreneurs have control of how their businesses are run, they are able to invest in the resources that will help them realize their personal vision of how to deliver a better client experience.

The freedom that comes along with being an entrepreneur means being able to offer a lot more choice and opportunity to clients. An advisor liberated from corporate restrictions, is able to run the practice that reflects their calculated vision in terms of what type of clients they want and services they want to deliver to those clients. It often ends up being a much more mutually beneficial relationship as a result.

As an employee of a larger firm, the advisor must use the technology and crucial tools such as financial planning software and CRM systems that someone else has chosen. The tools might be adequate to the job but they may not be the latest or the best iterations. Advisors might find something better, or even create it themselves, but within the wirehouse environment getting approval to use a new financial technology supplier or alternative investment manager can take what feels like forever. Advisors can ask permission to expand their toolbox, but the knee-jerk answer is almost always no. An independent entrepreneur is able to choose the software, hardware and strategic alliances that make the most sense for them and their clients.

Another advantage that the entrepreneurial advisor has over those who are employees at larger firms is that it makes the advisor more of a peer to their business-owning clients, a major demographic segment for many advisors. As a business owner, the advisor faces many of the same challenges, whether it is setting up their corporations, dealing with the taxation of those entities or simply constructing a P&L statement, and can offer credible guidance. That hands-on experience engenders mutual respect when the advisor is sitting across from another business owner.

And it’s not just business owner clients who feel more comfortable with an entrepreneurial advisor. During the worldwide financial crisis some of the biggest names on Wall Street got heavily battered and many of them are still trying to restore their tarnished reputations. Consumers can have long memories and once trust is lost it’s hard to restore. An independent advisor has no hidden agenda and their reputation is their own. There’s a certain comfort and confidence that clients gain from working with an advisor they know is only beholden to them. 

Being an entrepreneur gives the advisor control over what they deliver not just to clients but also their employees. An advisor who owns their business has a lot more freedom in choosing who to hire for their team and how to compensate them than they would as an employee of a wirehouse.

Basically, what we’ve been talking about in this article is the greater range of choices that are available to entrepreneurial advisors and their clients. Becoming an entrepreneurial advisor requires a much different mindset than working as a salaried or commissioned employee. At a wirehouse, often everything is aimed at the lowest common denominator so that the business can be scalable and thus more profitable for the institution. That is the opposite of entrepreneurship.

It takes considerably more effort to be an entrepreneur than it does to show up in a corporate office every day. Passion is an over-used word, but that’s what it takes. The advisor has to really want to build a successful business and do it in a way that makes sense for them and their clients. 

Once they’ve made that decision, there is a world of choices and possibilities open to them. Ultimately becoming an entrepreneur can be a win-win situation for the advisor and their clients. 

About the author
Kevin McFarland is a registered representative of Raymond James Financial Services, and founding partner of Concurrent, an advisor-owned partnership of elite independent organizations headquartered in San Diego and working together to realize a common vision of creating a superior client experience while growing their own practices.