For over half a century, The Gershman Group has partnered with advisors, guiding them to assess their practices and find the optimal fit. In the past decade, the perennial question has persisted: stick with the established wirehouses or embrace independence. Much like in investing, life demands a careful weighing of risks against rewards.
While maximizing earnings remains paramount for advisors, the revenue flow embodies a complex calculus. For some, it boils down to choosing between an upfront windfall or a more substantial long-term payoff. Those fixated on immediate gains often find themselves making a lateral move to another wirehouse, marginally superior to their current abode. The endurance required for a marathon view is simply too daunting. Yet, as we’re aware, transient victories bear their own costs – relinquishing control over one’s practice and affairs (down to intrusive biometric monitoring and personal device oversight), and potentially sacrificing coveted work-life equilibrium, remote work flexibility, and more.
Increasingly, advisors find the upfront gains at major wirehouses outweighed by the sacrifices involved. Many anticipate a further deterioration of questionable practices in these large institutions. Unless you’re a greenhorn indoctrinated into the entrenched “Big Daddy” ethos, your tenure might end abruptly when the music stops. This constitutes a significant gamble. A growing faction of advisors is inclined to roll the dice on a well-supported independent platform that emulates the suite of services offered by a major wirehouse sans the bureaucratic entanglements. These advisors are inherently entrepreneurial, craving dominion over their enterprise, and are willing to forgo fleeting financial perks in pursuit of potentially monumental backend rewards, including the prospect of selling their business for substantially greater multiples.
This year has borne witness to the painful fallout at First Republic Bank and the predicament of advisors bound to JPMorgan Chase. They grapple with Orwellian practices like a state-of-the-art employee surveillance system, and confront onerous contracts exemplified by the sale of Goldman Sachs PFM to Creative Planning. In the GSPFM sale, the 3-month garden leave and 6-month non-compete has forced advisors to make a difficult choice between short-term comfort and long-term gain, wherein advisors are compensated at a mere 20-30% payout versus the 70% open market value with 6-8 times earnings. Conversations with advisors reveal a shared sentiment – a sense of being hamstrung by contracts and policies that seem to seal their fate. Encouragingly, avenues exist to navigate these contracts and negotiate more favorable terms in a transition. It’s yet another risk, a familiar tune for advisors.
We staunchly believe that advisors, who toil tirelessly for their clients, should determine their ultimate destiny. How does it feel to have a firm exert such profound control over your clients and business that you can practically feel the bleed? Moreover, this same entity stifles your freedom of expression – dictating what you can and cannot say, text, capture, and more. In our estimation, advisors deserve better. You are the creators of opportunities, not mere agents of the firm. We implore advisors to ponder their choices and embark on calculated, meticulously considered risks. The rewards, we assert, ultimately outweigh the risks.
As the Editor of The Gershman Group, a boutique financial services consulting firm, TGG brings expertise in financial analysis, strategic planning, and market research. With a keen eye for detail and a passion for helping businesses navigate complex financial landscapes, TGG delivers insightful, high-quality content to empower informed decisions. Backed by years of industry experience, TGG makes complex topics accessible through clear and compelling communication, shaping the firm’s thought leadership and commitment to excellence in financial services.
