A Financial Advisor’s Transition to Independence

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The latest news, updates, and insights from LPL leaders on what's happening in the industry and at the firm. This is the LPL Share Cast.

Samantha Davison:

Hello and welcome to this episode of the LPL Share Cast series. I'm Samantha Davidson, your host. We're talking about being independent and what that means for you. To get a firsthand account, I'm pleased to welcome Mitch Rask with NorthPoint Wealth Management out of Oregon. Mitch, thanks so much for being here.

Mitch Rask:

Thank you for having me.

Samantha Davison:

How long have you been with LPL?

Mitch Rask:

My team joined in September of 2020.

Samantha Davison:

Now, you came from a wirehouse where you spent many years. Why did you make the change to LPL?

Mitch Rask:

It's a great question. I think the wirehouse experience, and it's been about six years since I've been with a wirehouse, but I think people take for granted that other than making money, the wirehouse really believes that your clients are theirs. So there's a lot of things that they do; products that they, I'm hesitant about using the word push, products they want the clients to be in to make them, the industry term is sticky, to keep the clients at the firm and make the clients feel like they can only have those products because the firm is providing them. So whether those are structured products or banking or debit cards, definitely securites-based lending, I feel like they were always trying to make sure those products were introduced to our clients, and our clients were saturated with marketing on those products so they'd feel sticky to the firm, whereas I was trying and struggling with the fact that there were certain types of investment programs I wanted my clients to be in because I thought that would be better for them. And I really just wanted to focus on that business. And then in the back of your mind, I think most advisors often feel like if independence is out there and it's lurking and it's obviously potentially better for you as the advisor financially because you have a bigger share of the pie of the commissions that are charged to clients and then that general idea of freedom which you don't really know what that means until you experience it. So that's kind of the thought that there was probably something better out there for us.

Samantha Davison:

And did you just come to a point where you thought there has to be something better? Is that what pushed you over?

Mitch Rask:

Yes. I think specifically there were probably some marketing campaigns or change of compensation, some things that just changed just too often in the wirehouse where we finally just said, "enough is enough. It's worth trying to take the chance."

Samantha Davison:

Yeah. And what does independence mean to you? And did that definition change once you joined? Meaning would you have explained independence as you experience it today?

Mitch Rask:

Well, the two factors that I mentioned, generally freedom and finance, are definitely true, but it absolutely is not how I would describe it. It is so much better than we thought. I would tell you that the first thing is that there's a physical difference between being at a wirehouse and your own firm. It's your building; it's your space. It's a reflection of who you are, not necessarily a decorator that's been hired by a New York firm to make all offices in the country look the same. It's customized to the place that you live and the type of investment philosophy that you have. So your name is on the door - that's the first thing that I would say is a big difference.

Mitch Rask:

You have true autonomy. You can focus on the type of business that you want to do. There's not people knocking on your door. There's not mutual fund reps coming through the office trying to bother you. You really have the ability to focus on what it is exactly that you want to do. That ties into the way that you market, right? We're not looking at sponsoring a golfer to come and represent your firm and turning on or off a certain demographic. You can market and advertise any way that you want and hopefully to promote the exact business that it is that you want to do. The other thing that I think is overlooked is your costs are essentially fixed. Once you know how much your support staff will cost and your building will cost and a little bit of marketing will cost, that really doesn't change. So as your business grows, your profit margin grows, and in a big firm, the more business you do, you're still giving them the same share of the pie. So it has been so much more than we thought it would be.

Samantha Davison:

And many people who think about leaving say among their biggest concerns, if not the biggest, is that they won't be able to take their clients with them. What was your experience and what would you say to them?

Mitch Rask:

I would first say to them, "take the plunge," right? There is this big fear that big firms tell you that they're not your clients, they're not going to move with you. And I absolutely think that that fear is overwhelming to a lot of advisors. So the first thing I would say is take the chance and believe in yourself. If you brought those clients on organically; if they were referred to you; if they believed in you and they weren't just inherited accounts, I would say for sure that these clients are yours and that they're going to come with you. The other advice I would give, and I think a lot of people overlook this - when you go independent, your clients want to know that their money is safe. And so I think when we went independent, my instincts were correct. While you want to send out a letter and tell your clients that you've gone to independence and all the wonderful things that happened, and we did that - that first paragraph said that, but the second paragraph said, "your money is insured," right? We're a custodian; your assets are being custodianed with this firm. Here's their financial backing, they're 'AAA' rated, whatever their credit rating is. They just want to know that they have the same insurance as they did at the other firm and the same backing.

Samantha Davison:

What I was just thinking about is independence - independence isn't the same everywhere, is it?

Mitch Rask:

No, it isn't. We had a first stop somewhere else other than LPL, and while we felt it was independent, there was a sense that there were rules and restrictions that didn't allow us to do all of the things that we wanted to do. And it did not feel independent at all which is why we moved to LPL.

Samantha Davison:

We've talked with Rich Steinmeier in our other podcast series about the evolution of our industry and really the move toward independence which allows for personalization and flexibility and things like that. He predicts that it's going to continue to move that way. What are your thoughts based on your experience and what you're seeing now?

Mitch Rask:

Yeah, I think there's two factors that are going influence independence in the future, an exponential growth towards independence. When I started in this business in 1998, financial advisors were charging about 3% to manage 401ks - that's now 25 basis points. They were charging 2% in advisory fees for portfolios - now every account we open is under 1%. So I think fee compression is going to be a major issue for wirehouses. The advisors at wirehouses are going have to compete with independent advisors, and they're not going to be able to do it with high fees, and they're not going to want the wirehouses taking so much of a cut of their fees if they lower them. Secondly, and I don't think the wirehouses even realize this, there's natural selection that's gone on. They've tried to sunset a lot of advisors that aren't very good at their firms, and they've put them on sunset plans, letting more intelligent, more sophisticated, more educated advisors manage bigger books of business. And by nature, those people are entrepreneurs. If they're entrepreneurs and they believe in themselves, the next evolution will be for them to move to independence. So for fee compression reasons and more sophisticated advisors who see the bigger picture, I think independence is going to grow exponentially.

Samantha Davison:

How do you feel investors see that? Do you think they recognize independence? Do they feel the difference?

Mitch Rask:

Yes. I would say in our experience, once they saw what independence meant to us, that it was our own business and that their assets were still going to be safe, they were on board to helping us grow our business. So money we thought we knew they had started showing up and massive amounts of referrals, unsolicited referrals started coming in from our clients becuase they wanted to see us grow and build our own thing. So I think that a client's reception to it is great. And as I mentioned before, as long as they don't have the feeling that they're going to get "Bernie Madoff-ed" for lack of a better term and that they're insulated from that, they're all in with you.

Samantha Davison:

And I just wonder do they also feel like because you're independent, you're able to make choices for them that help them meet their unique goals? That you're not putting everybody in a certain bucket, everybody's getting the same type of service?

Mitch Rask:

Yeah, I think they do. In some respects, we kind of safeguarded them from some of the products at the bigger firm. So they didn't know what was going on behind the scenes.

Samantha Davison:

Mitch, thank you so much for your time, and we wish you continued success and growth.

Mitch Rask:

Thank you very much. You have a great day

Samantha Davison:

To hear about the evolution of our industry, listen to my conversation with Rich Steinmeier in our Share Cast series.

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This podcast is for financial professional use only and not for public distribution.