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What is a Breakaway Advisor?

If you are a financial advisor thinking about starting an independent practice of your own, you’ve likely come across the term breakaway advisor.

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If you are a financial advisor thinking about starting an independent practice of your own, you’ve likely come across the term breakaway advisor. Also popularly known as transition advisors, breakaways are financial advisors looking to part ways with their existing brokerage firm and establish a Registered Investment Advisory (RIA) of their own.

Doing this allows the financial advisor to gain independence and run a business of their own. These days, it is possible to eliminate many of the hurdles that one faces on the path leading to this milestone.  

This path is certainly an appealing one, and the record numbers of financial advisors embracing the breakaway advisor avenue can attest to that. The numbers are at an all-time high and continue to increase with every passing year, which is something being witnessed for the first time in the industry. 

The breakaway advisor route is being taken up for a variety of reasons, but those, particularly in the brokerage environment, maybe tired of arbitrary decisions like reductions in payouts, product quotas, and revenue elimination.  Financial advisors are drawn to this new path mainly due to these reasons, along with the wide range of benefits an RIA gives to its clients, like a fiduciary status.

You might already be aware that RIAs are financial organizations that offer financial advice to their clients, all while keeping their best financial interests in mind. The Securities and Exchange Commission (SEC) regulates RIAs, which act in a fiduciary capacity. Because of this, RIAs are often held to higher-than-usual standards which are met unconditionally. They may also offer more complex financial advice, such as estate, tax, and retirement planning. 

The past year, TD Ameritrade Institutional released their Break Away to Independence Spring 2020 Survey data. The results appeared to confirm suspicions that had been brewing in the industry for a long time. Some of the key takeaways are outlined below:

  • 25% of brokers leaned towards the idea of moving over to an RIA and run their own firm based on the conventional breakaway model 
  • 36% of brokers are comfortable with the idea of joining existing RIA firms that offer tech platforms and operational support
  • There has been an increase in confidence and a 27% decrease in concerns regarding breakaway transition
  • 3 out of 4 of brokers believe their earnings will be greater as a breakaway advisor with an independent RIA
  • 40% are more inclined towards being a breakaway now (2020) than 6 months back

The pandemic has forced many potential breakaway advisors to put their plans on hold, due to fears that so many changes altogether may become a bit too challenging for their clients. Now, as the pandemic begins to settle, we can see that more and more financial advisors are gearing up to join an RIA. This is why 2021 has been dubbed “the year of the breakaway advisor.”    

The next question to follow after “what is a breakaway advisor” is often “why become a breakaway advisor?”. Below, we have outlined 4 key reasons which may encourage a financial advisor to choose the breakaway advisor route.

  1. Independence

Your independence may be one of the biggest factors that will encourage you to part with your brokerage or wirehouse firm. Change can often be difficult and intimidating but is often worth it. The same can be said for when your desire to achieve autonomy will inevitably become too intense to ignore. The COVID-19 pandemic forced everyone to stay home and gave many people a glimpse of what independence could feel like.

Advisors realized that they were much more productive when they worked on their own. Working from home saved advisors a lot of valuable time which was often spent commuting to their offices but could now be used to connect with clients and get more productive things done. 

The same scenario applies to breakaway advisors who require ample amounts of time to fully establish their business. And now that people have adapted to the online lifestyle with virtual meetings, it will be easy to draw in clients from anywhere.  

  1. Advanced Technology and Platforms

In 2017, it was reported by the U.S. RIA Marketplace that a higher payout appeared to be the most attractive aspect of becoming a breakout advisor.  While this is still important, it is no longer the sole factor attracting financial advisors to make this transition.

The TD Ameritrade survey suggested that tech platforms are now one of the most significant reasons why many are contemplating going down the breakaway route. Technology is vital for both financial advisors and their clients.  

As an advisor, you may require access to a range of software and technological programs for trading, billing, account maintenance, and compliance. Access to this tech ensures you can take care of customer relationships, financial planning, and management systems.

And of course, in today’s digital age, your clients will want accessible online tools to keep an eye on their account activity, statements, and balances. 

  1. Marketing resources

Success in today’s world depends a lot on how you present yourself. To attract new clients and gain their trust, you must come off as an established, professional brand. FragassoPartners.com can be considered a great example of this. Here, breakaway advisors enjoy access to the corporate RIA’s brand and its marketing strategies.

Featuring a complete in-house marketing team, breakaway advisors can enjoy turnkey marketing campaigns, including websites, social media tools, seminars, PR strategies, and digital marketing. Along with these, communication for client acquisition, education, and client retention are also provided.  

  1. Enhanced client experience

The client experience acts as the backbone for your success and should always be the top priority. Joining an RIA provides you with a lot of support and minimizes hiccups so that you can focus on growing your business and being there for your clients. An inclusive client experience guides you through the touchpoints along the client’s life journey anticipating their individual needs and expectations.

For example, with the Fragasso Partners, a breakaway advisor can refer to their client experience plan, which embodies all aspects of the client-advisor relationship from discovery meetings, plan deliveries, and ongoing relationship management and performance reporting.

As more and more investors seek RIAs, breakaway advisor numbers are experiencing a constant rise. With heightened autonomy and a wide range of benefits, the breakaway advisor route is proving to be a very appealing option for advisors. Many are exhausted from all the limitations they encounter in brokerages and wirehouses and are now seeking the opportunity to switch to RIAs.

Those looking to embrace the breakaway advisor path need to consider why they are making the switch and ensure that an association with another RIA is in line with these criteria. A reputable firm with solid plans, systems, and technology will help make the transition much smoother.

It eliminates the hassle, time, monetary investments, and guesswork that goes into setting up your own business, all while providing great rewards to both you and your clients. When done properly with the right RIA, embracing the breakaway advisor path can prove to be one of the best decisions you take to expand your business and enjoy unparalleled levels of success.

Investment advice is offered by investment advisor representatives through Fragasso Financial Advisors, a registered investment advisor.

Glitch Digital

Written by Glitch Digital

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