Freedom and the lure of entrepreneurship tempt advisors to leave large investment institutions despite the comfort of working in institutions richly endowed with resources to support them, attractive compensation, and career stability. The itch to go independent only grows when they are frustrated by the thorns of commission-based compensation models and the conflicts of interest gnawing at them.
Democratized technology tilts the scales in favor of freedom versus the security of brand name investment institutions. Today’s scale-agnostic digital platforms, of the kind Hayden Royal offers, enable independent advisors to inexpensively access resources for investment advice that were, in an earlier era, the preserve of large institutions.
Flat fee compensation, the cornerstone of the relationship between independent advisors and customers, clears the way to leverage digital platforms in the best interest of clients. Independent advisors can collaborate with their customers online to select, from a universe of investment options presented on the user interface of digital platforms, assets tailored to the portfolios that maximize the wealth of individual clients. When advisors are compensated with commissions by the institutions who employed them, they were incentivized to be more salespeople than investment advisors prone to promote only a subset of investment instruments limited to the catalog of their sponsoring institutions.
Independent advisors can use the time freed up from the promotion of products to provide customer service by learning about the risk appetite of clients, their desired returns, and life goals. Based on client information, independent advisors can be partners to their clients in the selection of investment managers and instruments that serve their goals. Hayden Royal’s digital platform provides a wealth of information about asset managers, the instruments and the risk and return combinations they offer, and access to their services.
The aligning of the clients’ interests with the business and compensation models of independent models is fortuitous in an environment where regulators’ zeal for fiduciary standards has been intensifying. The cost of compliance with fiduciary standards for independent advisors is lower because it is baked into their very method of doing business. On digital platforms moreover, the interactions with customers are tracked and provide data on compliance. By contrast, the commission-based compensation models in larger institutions can attract costly scrutiny from regulators. Without a digital platform to support their efforts, independent advisers can find it difficult to provide evidence of compliance with fiduciary standards. Furthermore, with few interactions with customers, there will also be little data that is tracked as proof of compliance with fiduciary standards.
Hayden Royal keeps the costs of doing business for independent advisors low aided by digital platforms. The cost of customer touch, transactions in assets, information processing, and compliance with fiduciary standards are low enough to be competitive with large institutions.