PA NC: Independence Dazed

Why be independent? And, when going independent, what business model is right for you?

According to three advisers, all with different independent affiliations, speaking at the PLANADVISER National Conference this week, it is clearly a matter of personal preference.

Both Tom Noble, of the Noble Retirement Group, a member firm of NRP, and Rick Shoff, SVP and District Manager of CAPTRUST Financial Advisors, offer both a broker/dealer and RIA model. However, panelist Michael Goss, Executive Vice President of Fiduciary Investment Advisors, LLC, is only an RIA.

“I don’t think one is better than the other,” said Shoff, of his decision to offer both fee models to this clients; “at the end of the day, it is the client’s decision.” However, he says, he does see the RIA model being more appealing to the mid to larger plan size. Moderator Paul Powell, TK at 401(k) Advisors, said that recently a $3 million plan asked to pay his firm a flat fee, showing that the fee consciousness is spreading to the smaller market.

In the recent regulatory and fee-focused environment, “more and more clients want to pay fees in RIA model and know exactly what their fees are,” Goss commented.

Acquisition Versus Affiliation

The three panelists all had different business models, as far as the ownership of their firm.

Rick Shoff, who joined CAPTRUST in late 2006, said it was an important decision to decide to go from owning his own practice, to being a part of a larger firm, who then acquired his practice. “I knew it was time to leverage my assets,” he said. Before being acquired, he had six employees focused on retirement plans; now he only has three because the work the rest of the staff did is now taken care of in CAPTRUST’s Raleigh home office. Although there had been lots of upsides to running his own business, Shoff said he was never fully optimized with respect to capital and thought that being acquired by CAPTRUST was the best way for his to grow.

Two-and-a-half years ago Tom Noble decided to start his own firm. In deciding to affiliate more recently with NRP, Noble said he found the retirement-centric focus appealing. Because NRP is retirement-centric, but not exclusively focused retirement, Noble said he sees all kinds of possibilities for growth, both in the retirement space and in the wealth management space. In Noble’s opinion, NRP offered him access to intellectual capital and to tools that would allow him to be more successful, including things such as lead generation support.

Goss and many members of his firm had been with Wachovia previously and decided that, because of their unique consulting arrangements with clients, the best way for them to have their own company was to create an independent RIA practice. This meant they were starting from scratch, creating their own infrastructure, but in Goss’ opinion, “if you want to truly be independent, you have to really want to own your own business.”

When getting down to a decision, at the end of the day, everybody will make what they have work, Shoff explained. However, he suggested, “if you are thinking about making the change – go to your clients and ask why they work with you.”  Then, use that to determine what you can leverage.

“You don’t know what you don’t know,” Noble said, but you can go out and find people to help you do things you don’t know how to do.