Stephen Tompkins was unsure about going independent, but IAA CEO Robert Russo knew that Stephen would not just survive but thrive from owning his own practice. To help ease the transition, IAA created a unique partnership model that would allow Stephen to “test drive” the process for a minimum of 12 months. IAA set up his lease, office, and admin, and paid all his bills. Stephen was charged for cost plus a nominal service fee. After the first 12 months was up, Stephen could decide on his own when he was ready to take over the expense side of the business.
The rest, as they say, is history. Stephen went independent and never looked back, with his only regret being that he didn’t do it sooner.
17 months in, Stephen spoke with IAA from his office in Clemson, SC, about being a guinea pig for IAA, the advantages of independence over an employee model, and some of the challenges he thinks young advisors and investors face when starting today.
How do you feel about taking part in our experiment?
I was the first advisor you supported in this type of transition process, so I was a little bit of a guinea pig. All advisors want to get moved over as fast as possible, but the reality is it’s a process. There were some growing pains, but things went very, very well. It’s a mad scramble, you work long hours, and it’s stressful. But IAA managed things nuts to bolts. Everything from technology, set-up costs, my phones, my computer, new systems and support, training, staffing, payroll, 401K, who does what, to compliance. IAA oversaw it all and did an excellent job, and it was very successful. I’m happy with the move and that I made it.
What was your transition like?
I’ve always been with a large firm, so I was used to just signing up for something when you needed it. The business side of things took a little bit of learning and IAA acted as a buffer and helped with that as I learned the ropes. Because of my unique arrangement, I had a year to figure things out and adapt to the learning curve. You’re in a rush to get things moved for your clients, you’re learning a new system and figuring out different aspects of a normal business and on top of it you have payroll, benefits…things you need to think about that IAA guides you on. They set you up with Redtail and Riskalyze. And then when you’re done with your transition, IAA is still there to support and guide you. Being able to just pick up the phone and call somebody is one of the benefits you normally only associate with being with a big firm.
What do you think is the biggest misconception advisors with corporations have about going independent?
The biggest misconception I had while at a big firm was that if you leave, you are on your own. And you are, but there are people that are there to help you. You’re not just out there treading water trying to figure it out. IAA was with me every step of the way. If I needed help with an HR issue I called Jessica, if I had a type of account question, I called Steve. Robert was always available and responsive when I reached out to him. Partnering with IAA meant I wasn’t alone; in fact, it meant the opposite.
How have your clients benefitted from your move?
They’ve benefitted a lot. I’m no longer sharing time with managing employees and servicing clients. I can focus more on what they want to accomplish and tailor what they’re doing from a financial planning standpoint. My costs are lower than what they were, and I don’t have the sales pressure from the firm to do certain things for clients. If my clients need something, I do it for them; if they don’t, I leave it alone. The key is I’m able to make the decision. There’s no one standing over me telling me what they want me to do vs. what my client needs me to do.
Percentage-wise, how much more of your money do you think you keep in your pocket than before you were independent?
A great benefit of being independent is you control your costs. You only pay for what you feel you need for your clients. I can’t speak for other advisors, but I keep at least an extra 20% more than what I had been keeping before. There are some start-up costs – for me they were minimal, and I made those up in the first few months.
If you could hop in a time machine and go back in time, how much sooner would you have gone independent?
A lot sooner! Big firms seem attractive, and there are advantages to starting out with them. It’s easier to gain experience and build a name with a more prominent firm. But it’s easier to get what you need when you need it when you’re on your own. When you’re independent, it’s like being at a buffet where you have all the options but get to choose the food you need, versus being at a big firm where you’re forced to take a little of everything whether you need it or not.
From a compensation standpoint, larger producers should do it sooner rather than later. Once you’re established, clients work with you, not the firm, and most of them will go with you when you leave.
What made you want to get into the financial services industry?
When I was a teenager, I invested a small amount of money my parents gave me. It did well (and not so well), but I was hooked and knew what I wanted to do. When I graduated from The Citadel, I took my first job with A.G. Edwards and have been a financial advisor for 27 years. I enjoy working with people and helping them. It makes me happy to see my clients get to do what they want to do and to be a part of making that happen. I also enjoy the flexibility the profession allows and how I’m able to be there for my wife and three daughters.
What do you think are the biggest differences for advisors starting out today vs. when you began your career?
I think it was “easier” to get in when I started as firms would hire as many as they could, knowing they would have a very small success rate. Today they are more selective in their hiring, and there are many more independent firms that specialize in niche markets and different investing vehicles and options.
What challenges do you foresee for the future of the industry?
One concern I have is that more and more advisors will only want to deal with older people with more money. The reality is that these high-net-worth folks started off younger with less money, so this is short-sighted. Younger generations of investors then get entrenched in discount firms/online trading and automated advisor services to where they don’t see the need for guidance from a financial advisor. They don’t know the value of advice, and they’re going to understand their finances less.
What are you busy with when you’re not helping people with their finances?
I’m a golfer and enjoy spending time with family and friends. I also enjoy going to Clemson and Citadel sporting events.
For more information on Stephen and his practice, visit his page on the Blackbridge Financial website.
*This conversation has been edited for length and clarity.