What Investment Bankers Need to Know to Go Independent

In the investment banking industry, going independent is manifestly challenging without the support of a large boutique investment bank or bulge bracket bank. Bankers in these institutions rely on the infrastructure that's provided to them simply by virtue of working in such places. How then do bankers who want to strike out on their own take the business relationships that they’ve assiduously cultivated for years and attempt to turn that into a professional independent business without the benefits of that infrastructure? We will explore all this in the following article.‍

How becoming an independent investment banker can benefit you

There are several clear-cut benefits of being an independent investment banker with one’s own boutique bank. The most obvious is that you’re in control of your career, with the flexibility and leeway to work on projects and select clients that align with your strengths, interests, and values. Another is that independent bankers earn a higher percentage of commissions and fees than those in larger financial institutions; the higher income potential then enables you to comprehensively build your brand and reputation.

As an independent investment banker, you have the ability to work with a diverse range of clients, from small businesses to high-net-worth individuals; this results in a more varied and interesting workload, as well as enables you to build a broad and deep network of contacts. And finally, independent bankers are able to work more efficiently, making decisions more quickly and decisively than bankers working in large institutions. This is particularly helpful when it comes to securing funding, or making investment decisions.

Steps to becoming an independent investment banker

To begin, it is essential to ensure that you have a pool of clients interested in collaborating with you and are in need of the services you offer. This may involve networking, advertising, and other marketing efforts to attract new customers. It's important to have a clear understanding of your target market and what sets your business apart from the competition in order to effectively reach and engage potential customers.  

The process of achieving independence varies depending on the specific situation and goals of an individual or organization. However, there are certain steps that are generally involved; these include:

1. Creating a legal entity: The first step is to create a legal entity for your business. This could be a sole proprietorship, partnership, corporation, or limited liability company (LLC), depending on your specific needs and goals. Creating a legal entity will provide protection for your personal assets and establish your business as a separate entity.

2. Obtaining necessary licenses and permits: Depending on the nature of your business, you may need to obtain various licenses and permits in order to legally operate. This can include state and federal business licenses, zoning permits, and health department permits, among others. It's important to research the specific requirements for your industry and location to ensure you have all the necessary licenses and permits in place. For instance, you may require a broker-dealer sponsorship if you would like to offer securities products and services to clients, such as stocks, bonds, mutual funds, and other investment products.

3. Establishing a business plan: A solid business plan is essential for achieving independence. This plan should outline your business goals, target market, competition, marketing strategy, financial projections, and other key details. Your business plan will serve as a roadmap for your business and help you make informed decisions as you move forward.

4. Securing funding: Depending on the nature of your business, you may need to secure funding in order to get started. This could include loans from banks or other financial institutions, investment from venture capitalists or angel investors, or crowdfunding from the general public. Securing funding can be a challenging process, but having a solid business plan and a clear understanding of your financial needs can help make it easier. 

It’s not that hard to build your own investment banking boutique

Although becoming an independent investment banker might appear daunting without the support of a large institution, a growing ecosystem of solutions helps to meet this challenge. Sean Beresini, Finalis’ Head of Growth, identified this issue and introduced the role of a tech partner, such as Finalis, to facilitate the job of an independent investment banker. 

Beresini says, “Finalis has a platform that allows bankers to build their own brand equity while maintaining the same support they are used to in large institutions. The platform takes care of regulatory compliance back-office structures, allowing bankers to focus on execution while maintaining all of their regulatory licenses.”

An important aspect of the independence process is that of transferring regulatory licenses. When bankers transfer their licenses to a broker-dealer such as Finalis’ Workflow solution, the process is streamlined through API connectivity with FINRA. This allows for easy retrieval of existing licensing information, and updates are made quickly and efficiently. 

The uncertainty of getting paid at the end of a transaction is a common problem for independent investment bankers. When they start a transaction, they don't know where their buyer will be or how the transaction structure will unfold. This creates complexity as certain transactions are not deemed securities and do not need to be affiliated with a broker dealer, while others are deemed securities and therefore need to be run through a broker dealer. With Finalis’ Ledger solution, independent bankers can rest assured that payment transactions will be properly handled, and that they expediently receive their success fees at the end of transactions.

Cultivating a client pipeline to originate deal flow can be a challenging task for any independent investment banker. It requires a lot of effort and resources to identify potential clients and build relationships with them. Once deal flow is originated, a good way to de-risk existing mandates is to leverage a network. Building a strong network can help investment bankers gain access to new clients and opportunities, as well as provide support and resources to help manage existing mandates. Finalis’ Connect solution provides investment bankers with a competitive advantage, helping them stay ahead of the curve.

Another consideration when becoming independent is the cost involved. Fortunately, the process of establishing a legal entity and other necessary steps can be done at a relatively low cost, without a significant upfront financial burden. This allows independent bankers to focus on building their business without being hindered by onerous financial constraints.

How can Finalis help you?

With a focus on providing world-class regulatory compliance support and legal resources, in a 100% cloud-based technology platform, Finalis is dedicated to helping independent investment bankers, placement agents, and M&A advisors achieve their goals and succeed in the industry. Finalis provides a platform supercharging dealmakers from start to finish on their deal life-cycle: from workflow, to connect, through ledger.

Our team is handling over 1,000 active engagements globally, giving us valuable insights into a wide range of transaction structures, industries and geographies; and allowing us to provide individual bankers with the right advice to navigate any challenges they may face. 

By partnering with Finalis, you can have the assurance of a reliable partner who can guide you through the process. If you're an independent banker looking for a platform to cover your back-office needs and organize your transaction deal flow, contact us to learn how we can help.
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Frenquently Asked Questions

What does it mean to go independent as an investment banker? 

Going independent means leaving a large bank or established firm to operate as a standalone advisory practice — either as a sole practitioner or by building a boutique. Independent investment bankers typically focus on a defined market segment, sector, or deal type, and operate with lower overhead than bulge-bracket or middle-market banks. Independence allows for more flexible economics and client relationships, but requires deliberate decisions about compliance, licensing, and deal infrastructure.

Do independent investment bankers need a broker-dealer license? 

In most cases, yes. Earning transaction-based compensation (success fees, retainers tied to deal outcomes) on securities transactions generally requires registration as a broker-dealer or affiliation with a registered broker-dealer under Section 15(a) of the Securities Exchange Act of 1934. Narrow exemptions apply in limited circumstances, such as the M&A broker exemption for qualifying private company transactions. An attorney familiar with securities law should review the specific activities planned.

What is broker-dealer affiliation and how does it work for independent bankers?

Broker-dealer affiliation allows an independent investment banker to operate under the licenses, supervision, and compliance infrastructure of an existing FINRA-registered firm. The affiliated banker conducts transactions under the broker-dealer’s umbrella, paying a fee or revenue share for the compliance and regulatory support. This model gives independent bankers the ability to earn lawful transaction-based compensation without building and registering their own broker-dealer.

How should an investment banker handle client relationships when going independent?

Client relationships are the core asset when going independent. Before leaving a firm, bankers should review any employment agreements, non-solicitation provisions, or non-compete clauses carefully with an attorney. Client relationships developed while at a prior firm may be subject to restrictions. Building an independent practice typically involves cultivating relationships developed outside prior employment or negotiating with a former employer on transition terms.

What compliance obligations do independent investment bankers face? 

Independent bankers affiliated with a broker-dealer operate under that firm’s written supervisory procedures, compliance program, and principal review processes. They must follow FINRA rules regarding communications with the public, suitability of recommendations, and maintenance of required records. According to FINRA, broker-dealer supervisory obligations require active compliance from both the firm and its associated persons.

What does deal workflow look like for an independent investment banker? 

Deal workflow for an independent banker generally follows the same stages as at a larger firm: origination, engagement, preparation of materials, marketing, negotiation, and closing. The difference is that independent bankers manage this workflow with smaller teams or individually, often relying on technology platforms and professional networks to fill resource gaps. CRM tools, deal management software, and data providers support the execution side of independent practice.

What financial planning should an investment banker do before going independent?

Going independent means transitioning from a salary and guaranteed compensation structure to a deal-dependent income model. Financial planning before the transition should account for the time between leaving a firm and closing a first deal as an independent — which can range from several months to over a year. Runway, health insurance, office costs, and compliance fees all need to be factored in before making the move.

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