John Pierce is Head of Business Development at Cetera Financial Group, driving Cetera's financial professional recruiting strategy.
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The year 2020 has altered the work-life balance of our country, and there is no better example than the financial services industry. The industry estimates there are roughly 300,000 financial professionals spread across the United States. Practically overnight, many of them found themselves working from home. These nonindependent financial professionals with W-2 work arrangements are sometimes referred to as "wirehouse advisers," coming from firms such as Morgan Stanley, Merrill Lynch and UBS.
According to Discovery Data, a database for financial and insurance professionals, nearly half of financial professionals are categorized as independent, hybrid or insurance advisers, meaning that they are not employees of a specific firm.
The pandemic-related work-life issues have highlighted the differences between these two groups. For many nonindependents, the current situation has made the flexibility of independence attractive. Why? What's on the mind of nonindependent financial professionals right now, and why we are predicting more will be looking to go independent soon comes down to the following five dynamics.
Dynamic No. 1: Technology has made us all independent, whether we know it or not.
While no one could have predicted the ripple effects of the pandemic, firms that invested in robust technology have thrived with employees pausing with little to no disruption to get secure VPNs set up. It was business as usual without the need for reporting to an office.
Additionally, firms outside of financial services that pivoted and focused on their associates and clients rolled out tools and support, like resiliency kits and protocols, so that their associates were safe while being able to care for individual clients in virtual environments. The initiatives that were rolled out in a matter of days were nothing short of astounding, given how slowly evolution can happen in our industry.
In financial services, firms are still recruiting. In fact, recruiting has picked up since work phones are often forwarded to individual cell phones, circumventing traditional gatekeepers or toll-free lines. Virtual office visits have allowed a larger set of advisers to explore firms that they normally would not consider, because they didn't want to spend days traveling across the country for a dog and pony show. And, as a friend said to me, how do you like being independent? Advisers now realize they are working in a virtual independent model due to the pandemic.
Dynamic No. 2: The freedom to be independent is appealing.
Cutting two to three hours of a commute out of one's day is driving efficiency. In fact, one company tracked a 47% increase in productivity due to the uptick in work from home (WFH) arrangements. I spoke with a strap-hanger who she said she will never go back to the underground commute grind — she can do her job outside of the office, is more productive and has a higher quality of life.
People are enjoying more time with family, the ability to get quick house tasks done, not having to be in full business attire ... and the list goes on. And sometimes it's nice to have a break from the co-worker who speaks too loudly or the helicopter boss. There is freedom in independence that we've all enjoyed and may not be willing to part with. This is a key trend to watch.
Dynamic No. 3: Financial professionals are entrepreneurs.
Let's all take a moment to celebrate that you learned you can operate your computer, transact business, call your clients and execute your business model virtually. Yes, many would still prefer to see clients face-to-face. Yet as we continue to WFH, financial professionals are realizing they may not need to pay 50 or 60 cents on the dollar for overhead support because their business is running at capacity. Those considering going independent have now had some practice.
Dynamic No. 4: Nonindependent work demands a different kind of discipline.
Working from home demands discipline and a new operating rhythm that may not be for everyone. Most independent advisers don't work from home, but have a sense of community at co-locations. Working from home is a personal preference, and some may want to go back to a W-2 environment. Financial professionals need to do what is right for them. They should consider WFH as a beta test of sorts — at least you tried!
One other note: Independent financial professionals also have to give up the comfort of a big name brand and set product construct. If that's not exciting, maybe the W-2 life is for you.
Dynamic No. 5: Different parameters suit different mental health needs.
WFH may create a problem — if financial professionals are working too much, it can cause burnout. Running a business means separating work and home life. That means forcing oneself to take breaks. One needs fresh air, exercise and space away from work. If you don't experience a little freedom from your keyboard or phone, the WFH environment can create burnout and eventually decrease productivity. Some people thrive in a more traditional, very structured office setting, and if that's you, making a move to become independent might not be the best choice. On the flip side, if you can balance it easily, the independent life might be where you'll thrive.
As we reflect on the financial services industry, we realize that everyone is now independent to a degree. The question will be how many are going to stay independent, and how many will pivot back to a W-2 model with its overhead now that they are functioning on their own?
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