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The Implications of ‘Quasi’ Independence: What Advisors Should Know

Today, there are about 300,000 financial advisors nationwide. Of those, many are affiliated to what we, at Revive Consulting+, call a ‘quasi’ IBD/RIA. What do we mean by ‘quasi’ independent? We are referring to the firms that call themselves “Independent Broker-Dealer and RIA firms”; however, by contract, these firms do not in fact support a truly independent model for financial advisors. Some examples may include broker-dealers attached to insurance companies, as well as other IBD networks that legally own and control the end clients of financial advisors.

‘Quasi’-Independence is a great solution for those who may have a niche practice centered around a particular product. However, holistic planning advisors and others affiliated in this channel may not be aware of the implications. Here are a few points to consider:

Conflicts of Interest

More often than not, your linkage to a ‘quasi’-independent firm will require you to sell one of their proprietary products first, meaning advisors are incentivized to recommend products to clients that earn them commission. (Have a look at your contracts!) The obvious downside to this is that you must sell products that come from your IBD-RIA or insurance-company affiliation, while there may be other solutions that serve as a better fit for your client. With increasing regulation by both the SEC and FINRA, and the overlap of the two, true independence is even more important for advisors to be able to promote without conflict.

You Do Not Own Your Clients

Under a ‘quasi’-independence model, you do not necessarily own your clients or their data. Your respective IBD-RIA partner does. Upon succession or exit, you are trying to monetize (sell) a predictable revenue stream based on relationships. How are you to achieve this without owning your own clients, their data, and your assets? And, what if your IBD-RIA partner sells to another IBD-RIA? Can you legally ‘bring’ your clients and their files to a new platform or will you be stuck with the new IBD-RIA that you did not choose?

Transferable Business Value

Are you building a practice with transferable value, or are you only generating revenue for today? When advisors of quasi firms do not own their clients, they realize that they are not creating saleable assets, or 'business value', because they don't own the underlying assets. In other words, they are generating short-term income or compensation today, but nothing of sustainable value that can be sold later.


Control, decision-making, limited options and execution More often than not, succession options are limited and controlled by the IBD-RIA. Resultantly, these options tend to be focused on the mechanics of maintaining assets and not the best path for the client or advisor. Advisors may not have the flexibility to scale down at his/her leisure, or have a say on the subject of where their clients end up. This is disappointing to see happen, especially after years of building trusting relationships with clients. Even if the IBD-RIA does allow advisors to sell clients, as per the transferable business value stated previously, it is likely limited to the IBD-RIA’s own network therefore limiting options and once again, not doing what is always right for clients.

Wrapping Up

At the end of the day, there are obvious advantages associated with staying with your current firm. ‘Quasi’-independent firms provide advisors with the infrastructure and support like any large wirehouse and it’s comfortable.

We recommend that if you are with a ‘quasi’-independent firm currently, that it be a stop in your long-term journey towards full-independence. Investigate your contracts to review the clauses and seek legal opinion from a specialized transition attorney. Take control and do right by your clients––consider taking your practice in a fully independent direction.


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