Going Solo Successfully Demands Many Skills


Like many employees, second-guessing your boss or company is a game that financial advisers at the big Wall Street firms play, too.

From the inside, it may appear that you could easily run your own company better and more profitably while enjoying building a businessfrom the ground up. But are you up to the challenge?

At big, national firms, "it’s such a plug-and-play atmosphere,” said Jack Elgin, a financial adviser who left UBS two years ago to start his own business with his partner there, Neven Zelich.

Elgin and Zelich, who are principals of Mid Atlantic Capital Corp. in Akron, Ohio, first worked together at Merrill Lynch, which they left in 2004 to join UBS.

“When you go out on your own, you have to think about how everything ties together — from technology to back office to compliance to products to platforms.” said Elgin.

According to AdviceIQ/Meridian-IQ, a database of registered investment advisers, RIA, there are 28,574 RIA entities, usually in offices of two to eight employees, and most are managing between $25 million and $50 million in assets. More than a 1,000 were created in 2011.

Elgin said he’s happier on his own and even notes that he wouldn’t do anything differently from what he did two years ago, if he were starting a business again today. Of course, that’s not the case with all advisers going independent.

Here’s what to consider:

  1. Know your motivation.

    “It’s best to understand why you’re contemplating it [having a firm] and what you are getting out of it,” said Steven D. Brett, who joined Marcum Financial Services, LLC, in Melville, New York, after spending several years with Merrill Lynch.

While there’s the potential to earn more money as a proprietor, “I wouldn’t do it for the money. We didn’t,” said Elgin of Mid Atlantic. The satisfaction of running your company and serving clients has to trump the idea of raking in big bucks.

Another thing to do is notify your clients before leaving your old firm. Brett, who told each of his clients in advance, found that it was a non-issue because many of them were accustomed to switching broker-dealers.

Do your due diligence.

Most successful solo financial advisers study the landscape before striking out on their own or making a decision with lasting consequences.

Brett assessed the business climate for nine months around the time of the Lehman Brothers’ collapse in deciding to go solo, whereas Elgin and Zelich “spent nine months to a year interviewing 10 to 12 broker-dealers to figure out the right one for us.”

Determine if you’re a manager.

Can you hire, motivate and, if necessary, fire people? And can you run interference in difficult situations and with unhappy clients, while making sure the many regulations are followed, the air-conditioning is cool, the computers are quick, health insurance premiums are met and the coffee is brewing?


Those are just a few of the tasks you’ll have to juggle as an owner.

Brett had owned a company, and Elgin had been a controller at a manufacturing firm, so for them the learning curve wasn’t as steep. If you’re not a natural manager, you’ll need to learn the skill fast or hire someone who can do that job for you.

Also, seek out sound legal advice. When scouting out lawyers, hire a local reputable securities lawyer who comes highly recommended.

Another tip: Be realistic about cash flow. “You should expect a couple of lean years at first, which is true when starting out in any business,” explained Carri Degenhardt-Burke, president of Degenhardt Consulting, an independent retained-brokerage and investment-banking executive-search firm in Jersey City, New Jersey.

And know that you may eventually earn buckets of cash. “Say you’re at a wirehouse [big financial firm] and you’re at 42-percent payout; the wirehouse gets 58 percent and that’s a commission on a sliding scale,” added Degenhardt-Burke. “If you are going to the independent model, you stand to make 58 percent to 60 percent. That’s a huge difference for Wall Street advisers.”