This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.
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YouTube is an amazing resource.
Similar to a Google search, you can explore YouTube for every imaginable topic, and you’ll likely find a useful resource.
YouTube predicts what additional content you might be interested in and shows that to you as you scroll through the site.
While there are brilliant engineers continuously refining that algorithm to make it more relevant, the results are sometimes bewildering.
For reasons I have no idea of, YouTube recently started showing me videos about being a big rig truck driver.
Count that as a “fail” on the algorithm’s part! I’ve never had any interest in that in my life.
With my curiosity piqued, though, I clicked on one of the videos. (Doing so was a miscalculation, as the algo is now certain I want to see even more truck driving videos!)
In the video I clicked on, an old-time trucker described how some truck drivers were mere “steering wheel holders.” Mildly intrigued, I kept watching to understand what he meant.
As my inquiring mind came to learn, there are many affiliation options truck drivers can operate under. Some work as W2 employees of large truck carriers. Some are 1099 drivers of a firm, while others are owner-operators, essentially owning their own business.
Sounds a lot like the options available to advisors in our industry!
The guy in the video was objecting to how employee drivers of certain large trucking firms are treated.
His take was those firms view their drivers solely as hired hands to move the trucks. They are “steering wheel holders” and nothing more.
The firm owns the trucks, owns the client relationships, owns the goodwill created, owns it all. The driver is an important but ultimately expendable resource that will one day be replaced by the next person in line.
I thought this was a harsh perspective, but as a YouTube-certified truck driver, who am I to be questioning a 30-year trucking veteran!
It got me thinking about the parallels to our industry.
More than once over the years, I’ve heard executives of large broker/dealers refer to their firm’s advisors as the “salesforce.”
Couple that mindset at a firm that feels that it, and not the advisor, owns the client relationship, and the steering wheel holder analogy becomes real.
While I’ve never thought of advisors this way myself, it is plausible to understand how an executive far removed from the 5,000, 10,000, or sometimes 15,000+ advisors at a firm might reach a point where they, unfortunately, view their advisors as part of a faceless, and ultimately expendable sales force.
To continue the trucking analogy, my guess is that respectable trucking companies treat their employee drivers well, give them reasonable compensation and benefits, and provide them a way to make a reasonable living.
But could those same drivers perhaps have more?
Could they …
- be building equity in an asset they could one day sell?
- have more flexibility with how, when and where they worked?
- manage their own P/L to achieve better economics for themselves?
- benefit from the tax advantages of an independent approach?
- find a path where they wouldn’t be viewed as a steering wheel holder?
You can see where I’m going with this.
Might the truck driver in the YouTube video …
- think harshly of our industry as well?
- wonder why some firms are viewed as owning the client relationship, instead of the advisors they employ?
- consider the advisors viewed as a sales force as no different than truck drivers unfairly being viewed as steering wheel holders?
- question why some advisors don’t consider alternatives that might be in their better interest?
Such ponderance oversimplifies the complicated set of options and circumstances applicable to advisors.
It is a relevant analogy and a reminder there is little to no downside to staying abreast of your options.
As I frequently say – because it’s true and to avoid hate mail – not all advisors should go down an independent path.
There are many successful and happy advisors in the W2 employee model. Due to their unique circumstances, that is the best path for them.
But just as a truck driver shouldn’t drive a rig for 30 years without considering their options, I encourage advisors to do the same.
There is a world of knowledge to help you learn more. Be careful what you search for, though; the algorithm might send you spiraling down the truck driving rabbit hole quickly!
Brad Wales is the founder of Transition To RIA, a consulting firm uniquely focused on helping established financial advisors understand everything there is to know about WHY and HOW to transition their practice to the RIA model. Brad utilizes his nearly 20 years of industry experience, including direct RIA related roles in compliance, finance and business development to provide independent advice regarding how advisors can benefit from the advantages of the RIA model.
Read more articles by Brad Wales
This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.
