Ask Brad: Do You Rent or Own Your Advisory Practice?

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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In a prior article, I noted the importance of owning the real estate you use for your office.

A parallel is whether you own your advisory practice or are simply renting it.

Conventional wisdom says you should never rent a home for 20 years; you should own your home.

Yet do you really own your practice?

I can’t recall who said it (as I would give attribution), but I once heard someone describe working at a traditional W2 wirehouse-type firm as renting a practice, whereas being independent is owning your practice.

An apartment renter is provided with a unit, a set of appliances, sometimes utilities, etc. If something breaks, it is not their responsibility. The landlord bears the cost and effort to fix it. This convenience for the renter can be attractive but comes at a cost. The renter is limited in how they can decorate or remodel; they must play by the apartment complex's rules, never build equity, etc.

A wirehouse advisor faces these same constraints.