Well-run advisory firms come in all sizes

With the worst of the pandemic potentially behind us, many financial advisers are likely beginning to reevaluate their priorities. That will no doubt include thinking seriously about whether their current firm continues to be a good fit.

Captive advisers may have an especially tricky decision, as for the first time they have been experiencing independence since remote work models were implemented last spring. It’s a safe bet that many of them enjoyed no longer being tethered to a desk, not to mention the freedom to serve clients with more autonomy. 


For advisers like that, it can be tough to put that genie back in the bottle which means thousands could be looking to become breakaways once the dust begins to settle.  

In mulling a transition, most will have a general idea of what they need from a new firm. But like all of us, they don’t know what they don’t know, so in some instances, the first step of their search is limited to a cursory consideration of various firms’ perceived strengths and weaknesses. 

Because of that, the process tends to evolve into an internal debate about size (i.e., “Small firms generally do this well, large firms do that well what are the trade-offs?”). There’s just one problem with that approach: Size, by itself, is not a good starting point for choosing a firm. 


Every firm has strengths and weaknesses, but whether the firm is large, small or midsize is not typically what determines them. Part of the reason stems from technology, which has become the great equalizer, with today’s platforms and tools so advanced that even the tiniest of firms can tailor solutions for advisers. 

But many other reasons can be even more significant. Consider the following: 

Firm management. What is the culture set by the leadership team? A firm with stable leadership and a defined, adviser-centric approach will typically provide a strong foundation for all kinds of practices to thrive.

Alignment. Firms and advisers won’t have identical needs and goals (their businesses are too different). At the same time, advisers with ambitious growth goals are unlikely to reach them if their firm doesn’t have similar aspirations to expand. Alignment is a critical ingredient for long-term success.

Balance sheet. As is the case for thriving independent adviser practices, successful broker-dealers and corporate RIAs typically don’t have huge debts on their books. But keep in mind that building a cushion and planning for the future aren’t limited to firms perceived to have deep pockets. In truth, any firm tortured by undercapitalization could suffer if its focus is on survival rather than where it should be on its advisers. 

Approach to risk. Managing risk effectively doesn’t mean avoiding it altogether. While firms can’t say yes to everything, there is a happy medium between rejecting complex or sophisticated offerings out of hand and approving them without professional review. Ultimately, the best firms manage risk with robust due diligence processes, not by limiting availability and access. 

Flexibility. All too often, firms of all sizes take a my-way-or-the-highway approach with their advisers, restricting their ability to serve clients the way they see fit. This type of rigidity is bad for adviser businesses, investors and the industry. 

None of this suggests that firms of any particular size are inherently bad. But during this era of massive upheaval, as advisers reassess what they need and what their clients need, they would be wise to evaluate firms based on what they’re doing and what they’ve done, not on how big or small they are. 

[More: Troubling surprises advisers discover when switching firms]

Jamie Mackay is vice president of business development at the Strategic Financial Alliance, an Atlanta-based firm.

TechSTACK$ hosts on using social media for prospecting

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