Are you a financial advisor trying to decide what type of firm to join? Or maybe you’re an investor trying to choose the right financial advisor?
Whichever group you fall into, you may have come across this question during your research: what is the difference between a wirehouse and an independent Registered Investment Advisor (RIA) or broker dealer?
There are significant differences between wirehouse firms and independent RIA/Broker Dealers for advisors and clients. Here, we’ve created an infographic to lay out the main differences so you can make an informed decision about your career and financial future.
What is a Wirehouse?
A wirehouse a term used to describe a full-service broker dealer. Modern-day wirehouses range from small regional brokerages to large institutions with global footprints.
Wirehouse vs. Broker Dealer & Wirehouse vs RIA: Independence Over the Business Structure
In a wirehouse structure, financial advisors are considered employees of the firm. At independent broker dealers and RIAs, on the other hand, advisors are considered owners of their own advisory business. They have the freedom to independently establish their own location and client culture.
Freedom Over Client Portfolio
This difference applies to advisors more than clients: under a wirehouse structure, financial advisors are often limited to the types of clients they can work with based on size and revenue. Advisors’ payouts may also be denied if the client doesn’t meet a minimum threshold.
In an independent firm structure, advisors are free to choose which clients they work with. This freedom also includes full payout on all accounts of any size.
Product Offerings
Both wirehouses and banks often have proprietary products that advisors are required to offer their clients. Particularly at banks, representatives are often incentivized to cross sell products, including mortgages, retirement plans, and life insurance.
Advisors who work at an independent RIA or broker dealer aren’t incentivized to recommend a particular product over another, and so have the freedom to recommend investment products based on their clients’ best interest.
Payouts
The payout potential for financial advisors at independent firms is much higher than that at wirehouse firms and banks. That’s because advisors at RIA’s and broker dealers can choose to have the firm cover their overhead costs or receive a higher payout by covering overhead themselves.
The Bottom Line
If you’re a new financial advisor that doesn’t yet have a client portfolio or experience giving investment advice, then going with the structure and training offered at a wirehouse firm may be best for you.
For advisors that already have a book of clients and want more independence with the types of clients they work with and the products they offer, then an independent RIA or broker dealer is best for you.
The advantage that we have as a hybrid RIA and broker dealer is that we can offer a full suite of products and services. Our advisors benefit from the option to work with a wide range of clients, and their clients enjoy fiduciary advice on investment products that are best for them.
No matter which type of financial firm you choose, the most important thing is to feel that you can trust who you’re working with. For questions about investment advice or financial advisor opportunities, feel free to send us a message and we’ll happily get back to you.
