Mark Gottlieb tried to roll with the changes when UBS bought his former firm Piper Jaffray in August 2006. Many of his fellow advisors were heading for the door, but Gottlieb decided to give his new wirehouse the old college try.

Within half a year, he was tired of rolling—he just wanted a change. So in January 2007, he left UBS for Raymond James Financial Services. "I did not like it," he says of his UBS stint. "UBS was not client-friendly or advisor-friendly."

Gottlieb, a Wayzata, Minn.-based advisor, rehashes a litany of new policies from the wirehouse that irked his clients, including an across-the-board $150 account fee. Gottlieb says that UBS' position was that the fee covered a checking and Visa card. Despite his protests that the vast majority of his clients did not use those services, UBS declined to waive the fee, he says. By comparison, Piper had a $50 fee that was waived on accounts over a certain size. UBS also reduced the money-market rate that clients received based on the combined value of the client's money-market balance and overall portfolio size, Gottlieb recalls. "To get a normal rate, you had to have a household value of $2 million," he says. Also, UBS tried an aggressive cross-marketing mailing approach that further irritated Gottlieb's clients, who were already complaining about the service and the new account fees. He passed along the complaints, to no avail. The corporate practices continued.

Gottlieb left the wirehouse more than a year ago, but industry observers say that it's still a good time for any wirehouse advisor considering the leap to independence. But it has to be for the right reasons—and money is not at the top of the list.

If it were, Gottlieb likely would have taken another path. Other wirehouses were offering him what he calls "large checks," but he decided to forego the upfront money and stake out his independence instead. "You really have to be committed to this," he says. "For the right reasons—for the clients and the freedom of the independent model."

Analysts and industry participants, including recruiters at Wachovia Securities and at two of the biggest independent firms, LPL and Raymond James, echo Gottlieb's sentiments. (Raymond James and Wachovia each have both a traditional employee channel and an independent channel.) All three firms agree that the number one reason for advisors to leave a wirehouse is a burning desire to run their own businesses—not for a bigger payout.

The money can be tempting. LPL recently increased payouts to up to 98% for producers bringing in $4 million a year. But advisors need to recognize there will also be higher costs if they go independent and those payouts can be eaten up quickly.
Rebecca Pomering, an analyst at Moss Adams, says, "If an advisor is evaluating going independent, it's not the external factors—the market and competitors and sliding firm share prices—they should consider first—but the internal strategic decision. Is the independent environment good for the kind of business the advisor wants to build?" She adds that many aspiring independents make an early misstep by asking themselves a common question: "Could I make more money doing what I do in a different environment?" Pomering notes that they "could get caught up in the economics and forget the actual transition from being an employee to being a business owner."

Control Versus Camaraderie

Independence is not for everyone, says Chet Helck, the president and chief operating officer of Raymond James Financial. Advisors who will succeed at it, he says, must be "willing and able to handle the responsibility of being a manager of a business and an owner of a business in addition to being able to handle the responsibility of being a financial advisor to [their] clients. Not everybody is willing and able to do that."

Those responsibilities include acting as your own office manager and human resources person as well as scouting your own office space. Helck's firm and other independents (including LPL) offer help with these chores, but the ultimate responsibility is still on the advisor-turned-business owner.

For advisors who have that entrepreneurial drive, though, going independent can be life-changing. Warren Whatley, for one, works in Raymond James' independent arm under the name Birmingham Investment Group in Birmingham, Ala., and says that going out on his own was "the best thing I ever did, no question about it."

Whatley says the decision boiled down to control. And now that he has had a taste of it, he likes it. He says he has immediate access to his compliance officer or other back-office specialists, instead of having to deal with a manager first. "At a wirehouse, you're an employee and you have a lot of layers of people who are watching over you—manager, operations manager, administration manager—and lots of layers you have to go through to get things done."

He adds that he had a great branch manager at Wachovia, but the company infrastructure still got in the way. Specifically, the ability to set pricing was one of the biggest concerns. His 19-year career path in the business started at regional firm JC Bradford, and he made stops at ever-bigger firms due to acquisitions—Paine Webber, Prudential and, finally, Wachovia. At Wachovia, he says, he had a $95 minimum ticket charge; as an independent, his minimum is $22 per trade plus a penny-and-a-half per share.