Much of the conversation around the rise of the independence movement in wealth management has focused on financial advisors. They seek better work environments, better economics, ownership and control, and relief from constantly peering around corners for the next adverse corporate action. These benefits are compelling for advisors. But there’s another part of the story that’s gone largely unnoticed: independence isn’t just better for advisors, it’s transformative for clients.
This angle has likely been overlooked because the most vocal advocates for independence have naturally been the pioneers and platform leaders facilitating advisor breakaways, like Shirl Penney, CEO of Dynasty Financial Partners. The messaging targeting advisors has been effective, driving substantial movement from traditional firms to independent models. But the narrative that advisors choose independence because it’s better for clients is the story more seldom told. The next wave of growth in the independent channel will be driven not just by advisors seeking better circumstances, but by clients demanding better outcomes.
Independence Offers a Better Experience for Clients
What does the client experience actually look like at an independent RIA versus a traditional firm? The differences are tangible.
1. True Open Architecture
Large firms claim to offer it, but what they actually provide is selective access to outside managers who often pay for shelf space or generate ancillary revenue through investment banking or trading relationships. That is not open architecture; that is a curated marketplace designed to benefit the firm.
Independent RIAs, by contrast, can genuinely scour the market for the best solutions without institutional conflicts driving selection.
2. Absence of Structural Conflict
The structural conflicts at large firms are not theoretical, they play out in consequential ways.
- Take the bank affiliated wealth management firm that decided to migrate its entire client base to a new internal investment model. The change was implemented uniformly, without regard for individual client circumstances and triggering unnecessary capital gains taxes for some clients. This was not done because it was good for clients. It was an efficiency initiative, a least common denominator approach to managing thousands of relationships at scale. Independent RIAs customize portfolios based solely on each investor’s needs and risk profile.
- Consider the regional bank that decommissioned its third party custodian, one that clients had grown to like and trust, in favor of an internal custody solution. Better for the bank’s bottom line or efficiency, perhaps, but not better for clients who now faced account re papering and an often inferior technology platform. Independent RIAs allow clients to remain with the custodians they like.
Without competing corporate and shareholder interests, the calculus at independent RIAs is reduced to “what’s best for the client”?
3. Transparency
At independent firms, fees and costs are fully disclosed. There are not hidden charges, proprietary products masquerading as best in class solutions, or revenue sharing arrangements that put the firm’s interests ahead of the client’s. Distribution is not a profit center, it is a service.
Perhaps most revealing is the distinction between “fees” and “costs.” One client who transitioned from a national brokerage firm was concerned about fees. The independent advisor explained that while the advisory fee would be the same, the overall costs would be less, and more transparent. This came to fruition immediately in three ways:
- Cash balances earning 25 basis points in a proprietary bank sweep were moved to a money market earning 4.1 percent.
- A securities backed loan tied to a proprietary benchmark that was 75 basis points above SOFR was repriced substantially lower.
- An alternative investment share class that paid trailing commissions to the previous “broker” was replaced with a lower cost share class.
Independence can remove hidden costs and eliminate distribution as a profit center, which can lead to better outcomes.
4. Separation of Advice from Product and Custody
There was a time when only family office level wealth could command access to differentiated investments, sophisticated banking and lending, comprehensive planning, global custody, and white glove service. Today, virtually any client can achieve all of this through a single independent RIA supported by a robust network partner. The separation of advice, custody, and product delivery has fundamentally changed the landscape.
- Interested in bespoke alternative investments, direct investments, co investments, venture capital, private equity, private credit? Independent advisors have access to a broader universe of opportunities tailored to each client’s specific goals and risk tolerance.
- Need to shop for the best lending rates across multiple providers instead of being captive to one firm’s balance sheet? Independence makes that possible.
- Want to allocate 5 to 10 percent of your portfolio to digital assets and have the choice to use pooled vehicles like ETFs or direct storage solutions provided by innovative custodians? Many large brokerage firms cannot accommodate that. Independent RIAs can, because they are platforms of choice.
The old equation that large firm size equals more resources and better access has been inverted. Independent RIAs now offer everything clients had before, and then some, but without the conflicts that have become institutionalized at large global firms.
5. Meeting the Next Gen Where They Are
The massive generational wealth transfer now underway will continue for decades, and research shows that Millennial and Gen Z earners and inheritors may not favor their parents’ advisors or traditional firms. The most effective independent firms are building true multi generational teams, leveraging cutting edge technologies that can take large firms years to deploy, and meeting next generation clients where they are. This ultimately helps clients ensure that both their legacies and their values can endure.
6. Alignment
At its core, the case for client independence comes down to alignment. Any particular client or family matters far more to a business owner or partner than they do to a large global or regional financial institution. In the absence of competing corporate interests, it becomes all about the client, their best interests, their values, and their outcomes.
What Will Drive Clients Toward Independence
Clients may not yet fully appreciate how much the democratization of financial services has leveled the playing field. The name on the door has become largely meaningless in practice. Additionally, clients are increasingly fatigued by adverse headlines, corporate scandals, disruptive mergers and acquisitions, and personnel turnover at many large firms.
As we in the industry do a better job educating clients about the independence option and what is in it for them, these disruptions will increasingly drive them toward the independence model.
Summary
If you know, like, and trust the owners and partners of the firm you entrust with your financial future, and if you are convinced you will have access to anything and everything you had before, and then some, you will likely enjoy greater peace of mind and outcomes more closely aligned with your goals at an independent firm. Properly executed, the only things you leave behind when moving to an independent, partner owned firm are bureaucracy, bottlenecks, and conflicts.
Disclosure
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