What does “independence” mean to you?
These days, countless advisors are seeking independence or thinking about breaking away. With so many options, many are unsure about which direction will truly make the most sense for their unique situation.
What are the right questions to ask throughout this transition process? How can you increase the likelihood you’re creating a new business model that you’ll be so happy with that you don’t have to go through such a change again?
For almost 20 years, our passion has been walking alongside fiercely independent advisors to help them achieve their ideal business. On a daily basis, our consulting team helps advisors gain a better understanding of which questions to ask (as well as potential answers) as they consider major business decisions.
Years ago, our solution was built “by advisors, for advisors” and we continue to maintain that spirit. This mindset sets our solution apart from the others.
FocusPoint Solutions recently coined the phrase ‘The 3 M’s of REAL Independence™’.
From our standpoint, in order for an advisor to be truly independent, their business must pass The Triple M Test™. This means it has the three crucial components (or M’s) which represent true independence: *Mobilization*, *Modernization*, and *Monetization*.
How can you tell if your business has these elements? Ask yourself this question:
As an independent advisor, does your business pass
The Triple M Test™?
Mobilization:
- You own your clients, your licenses, and your data.
- You are not beholden to anyone, nor are you under any kind of restrictive covenants or conditions.
- You are free to move and pivot to position your business for success in a changing environment.
- If you need to make a change, outside of your own clients, you do not need permission from anyone to take action.
Modernization:
- You can take advantage of all the latest (non-proprietary) technologies and industry innovations.
- You are not restricted to what a service provider chooses for a tech stack.
- More importantly, you’re not restricted to what they do NOT choose to invest in for various reasons (cost, understaffed compliance departments, competition, unused licenses purchased upfront in bulk, etc.).
- As the market and your target demographics change, you are able to make quicker adjustments; i.e. testing out new markets or solutions on your own to make timely decisions that are right for your business.
Monetization:
- As an independent RIA, you can achieve the most value for your business.
- Your fee revenue can flow through to a corporation versus a person, which brings tax advantages and increased valuation metrics.
- By maintaining more control over your own balance sheet (versus being a line item on someone else’s) along with its levers of profitability, you have more room to grow faster and smarter.
If you answered “yes” to having these three crucial components (aka The 3 M’s of REAL Independence™) you’re likely in a truly independent situation.
If you answered “no” to any of the above, you may be seeking a solution that offers you more independence.
Here’s another great question to ask:
Are you in a vertically or horizontally structured
business model?
★ Vertically:
- You are operating in a cylindrical platform structure based on whatever your service provider (not you) has designed.
- More often than not, this business structure results in the advisor being managed in one of two ways:
- To the lowest common denominator, or
- For the underlying benefit of third-party participants, i.e. private equity, venture capital, future IPO ambitions, bankers, angel investors, affiliated entities, executive comp plans, etc.
★ Horizontally:
- Your business has the ability to create a wide versus narrow economic moat.
- You are able to identify and optimize the quality of solutions or services more easily, adding or deleting them as you see fit.
- You can enter into new markets or lines of revenue, targeting new undiscovered solutions which make sense for you and your business.
- You have more freedom to experiment and innovate on your own.
