Leave the Bank Behind

Welcome to this week’s edition of Cape May Wealth Weekly. If you’re new here, subscribe to ensure you receive my next piece in your inbox. If you want to read more of my posts, check out my archive.

Note from the author: As the final article of the year, I wanted to take the time to write about something that perhaps is less relevant to my readers on the LP side, but of a lot of interest to my readers in the wealth management, multi-family office and private banking space. It’  a long read, but hopefully full of valuable examples for advisors looking to follow my path into independent wealth management.

When I got started in Goldman Sachs’ Private Wealth Management Division back in 2015 (first as an intern, later as an analyst), a lot of my fellow business degree students were sceptical of my choice of career path. To them, wealth management was synonymous with dubious salesmen looking to sell them overpriced actively managed funds or insurance policies. And while their scepticism for those specific individuals was absolutely on point, it was perhaps less warranted for the wealth management industry - meaning firms and individuals specialized in serving affluent individuals, with investable assets starting in the low seven figures going all the way to double- or triple-digit millions. I personally found my calling in this industry - to this day, nothing brings me more professional satisfaction than helping clients holistically with all their wealth-related matters, ranging from basic financial planning to their asset allocation to more bespoke topics such as direct investments or complex structuring.

While I left the ‘sell side’ of the wealth management industry for a while (setting up two family offices before ‘returning’ in 2023/2024 with Cape May), I still found myself as a part of it during these years, not only as buyer of their services, but of course also by staying in touch with my former peers. Since I had been one of surprisingly few to make this career step of leaving the bank for a family office role, and later my self-employment, many had asked me over the years what I think they should do as their next career move. It’s not a new trend for banking professionals to want leave for less stressful (and maybe less political) places, whether that is private equity / venture capital, a corporate role, or of course the very trendy path of Becoming A Famiy Officer. (Interestingly, I also found myself speaking to fellow family officers who were also thinking about leaving the Buy Side for the ‘Sell Side’ again.)

But over the years, one thing surprised me: When it comes to my former peers and colleagues in wealth management, almost none of them ever considered making a move into self-employment as a wealth manager.

Why Private Bankers Don’t Think About Their Own Wealth Management Firm

Perhaps a controversial opinion, but I think UHNW wealth management tends to be less entrepreneurial than other parts of the wealth management industry. On the ‘lower end’, whether that is the independent Finanzanlagenvermittler or even someone working in the ‘mass affluent’ division of a bank, business models and compensation to be very success-based, meaning that advisors only receive a small salary and access to the wider platform, but otherwise are somewhat on their own. That can be much more challenging in practice, but also tends to leave a bit more flexibility on the final ‘model’ that such advisors tend to pursue (i.e. more focused on transactional business such as individual trades or real estate, or a more portfolio management-focused approach). 

In the UHNW ecosystem, I’ve found things to be a little bit more guided, ranging from the compensation (often a bigger base salary and only a smaller bonus until they build bigger books and reach higher ‘titles’ such as VP or MD), to how they are managed (not left on their own, but closely guided by senior advisors), how the acquire clients (self-driven, of course, but sometimes also driven by internal lead allocation), to the business model (carefully curated platform and strong focus on certain products, i.e. model portfolios). Is this a bad model? Not at all, and the success of large wealth management divisions (like at GS!) and independent private banks absolutely speaks for it. When done right by the right person, chances are that an individual advisor might have a higher chance at success than if they were to go out and build their own brand and company. Some individual relationship managers at the largest banks (think my former colleagues at Goldman, but also other banks like JPM or UBS) on their own have built client books in the billions of euros - bigger than most independent wealth advisors firms in Germany.

But overall, it’s perhaps just a little bit less entrepreneurial - which is why I see much fewer individuals from those ‘higher echelons’ consider striking out on their own. Which is ironic, because often, I see that those individuals are less happy than their counterparts at less prestigious institutions. One factor can be internal politics. Another, perhaps more so, is golden handcuffs - if they’ve built a proper book, they might get paid very well. Lastly, unlike other parts of the market (i.e. independent advisors) or other parts of the world (i.e. the US), it is tough, if not impossible, to take your book elsewhere with you.

As said earlier, there is another group which (to my surprise!) is much more interested in becoming, self-employed UHNW-focused advisors: Those aforementioned financial advisors serving the mass affluent (think 500K€ to 2M€ in investable assets) looking to step up their game. Typically, they are employed at a bank’s regional hub (think Sparkasse, Volksbank, Commerzbank) or at a small wealth manager, and got tired of working according to their employer’s pre-defined framework - often one that is simply not according to modern standards anymore (think retrocession-bearing funds, reliance on active managers over ETFs, little to no financial planning etc.). In some cases, they’re also looking to grow professionally, i.e. move on from mass affluent clients (500K-2M€ in assets) to the ‘regular’ affluent (think 2-10M€), where there’s also more room for them to build and utilize their technical abilities (investing, financial planning, etc.). In other words: Those individuals have seen the path of ‘guided entrepreneurship’, but want to go out on their own, start their own firm, and be in control of their own destiny.

When such individuals reach out to me, I try to share with them the ‘technical learnings’ that we’ve built from our small ~2-year head-start as founders of a wealth advisory firm, such as which Haftungsdach to pick (Inno-Invest, of course, and let them know I sent you 🙂) , which custodians to use, how to build your investment platform, and of course, whether content-driven marketing makes sense. But more often, they reach out to me as they are about to make that step into entrepreneurship -  and want to hear from someone like me who has just started (but maybe not reached ultimate success just yet) on how it feels, and what to keep in mind.

So let’s finally get to the main section of this article: Whether you are a young financial advisor at Sparkasse ready to make the leap, or a wealth advisor at major private bank who’s only ever thought about it after a few beers - let me tell you why I think 2026 is the time to start your own wealth advisory firm. 

The wealth management model is changing in favor of independent and specialized advisors. 

The German wealth management market is often described as overserved - there’s simply too many advisors out there going after the same clients, and offering the same type of services. And that’s not wrong, as there are indeed many banks and advisors out there, all positioned as generalists offering some slight variation of your 60/40 model portfolio.

There is another important change going on, which is that (younger) clients coming into money are simply much more educated than their parents were. They’ve grown up with publications like Finanzfluss, have already traded ETFs on Trade Republic or other platforms, might’ve even dabbled in crypto, VC or PE, and are simply interested in educating themselves in investment-related matters. It’s especially those clients that are going to ask tough questions, and are unwilling to pay high fees without receiving the required service in return (think adequate performance, but also related services like financial planning, support on tax questions, etc.).

But after ~3 years in this space, I don’t see this as an issue, but rather, a massive opportunity for differentiation. To give you the example of how we’ve positioned ourselves: Our clients work with us for many reasons, but the predominant theme continues that they want an advisor with skills and experience at the UHNW level (which many independent advisors can’t or don’t want to offer), but who is neutral and unbiased (which they think is not the case for banks despite a high-quality offering). Most importantly, with assets of 2-25M€, they actually want to be a client that is important to their advisor - which can be tough for MFOs or private banks who start at 10M€ but understandably end up giving more share of mind to their largest clients, such as family offices with 100M€+ in AUM.

Or as I like to describe it: Our clients are too smart and too big for Sparkasse and Honorarberater (fee-only advisors), but too small and too ‘complex’ for private banks and UHNW divisions.

Other good examples of differentiation that I’ve seen include:

• Geographical focus. While cities like Munich and Hamburg are likely overserved by the number of advisors, many cities don’t have modern, high-quality firms. Berlin is one of these cities, and I’m happy to see that we but also other peers are starting to build well-performing businesses here. And there’s still many other cities out there where the only wealth manager is 60-year old man who still operates like he did when he started 30 years ago.
  

• Industry focus. My good friend Daniel Schex is specialized in multi-generational families who own German Mittelstand businesses. In the US, I spoke to an advisor who focusses solely on real estate professionals. Or there’s an independent advisor here in Germany who focusses only on Lufthansa pilots.
  

• Area of expertise. There’s advisors who focus specifically on certain asset classes such as real estate or venture capital. Other are focused on curating co-investments for their clients. Yet another might specialize in high-end wealth reporting.

And from personal experience, I can tell you - many clients are looking for a specialized advisor. In a world where information on almost all investing-related matters is at your fingertips, they don’t want a generalist advisor, but someone with expertise working with clients that have the same challenges, needs and wishes as theirs. And once again, from our experience, I can tell you that this specialization (and less so a differentiation purely on investments) does convince clients to move away from some of the most prestigious names in banking to a nascent advisory firm like ours.

A final remark on competition: I’ve yet to compete with another specialized, independent wealth management firm from my network. On the one hand, there’s simply too many old-fashioned advisors, and overpriced managed accounts at second-tier banks, out there. On the other hand, most clients at those specialized firms are simply so happy with the service and offering that they simply don’t want to leave. And if anything, I wouldn’t mind some well-spirited competition, especially from someone who had the courage (like we did) to go out on their own.

You’re in control of your business model.

Shortly after I started working full-time at Goldman Sachs in Frankfurt, we had a new advisor join our office. And from Day 1, he had me as the analyst help him assist on what in hindsight seemed like somewhat odd pitches to me: Highly specialized and customized cash management solutions. Tailored, ‘off-platform’ direct investments. Even very obscure hedging opportunities, such as milk futures. Back then, I wondered - why go through all this effort to personalize and customize? Why not just stick with those ‘proven’ model portfolios as the other advisors were using?

While in hindsight I think there were some things I still wouldn’t do, I see now - and admire! - why this advisor went down this path. In a world of highly commoditized core investment offerings, such as your traditional multi-asset portfolios, you don’t don’t differentiate yourself through yet another moderate-aggressive managed account, but through unique ideas and solutions to your clients’ hairiest problems. 

Highly specialized cash management? Offered the client a solution to avoiding negative interest rates that were prevalent back in the day. 

‘Off-platform’ direct investments? Showed the clients that you understand what type of investment they really want for - and the ‘off-platform’ aspect demonstrated that they weren’t just client #12 that you sent that new PE fund to. 

Milk futures? Gave the client the confidence that you want to help them solve problems outside their portfolio as well. 

Unsurprising, that advisor ended up being very successful - but did have to combat the doubts of his higher-ups and his fellow advisors. Why do I give this example? Because simply said, you don’t have to deal with them if you are your own boss. No politics, no processes (except those set by yourself) - you can actually do what you think is best for the client, and not just say it as a empty phrase before selling them on a model portfolio.

You control your revenue - and build actual equity value.

As I mentioned before, some of the advisors who become successful at UHNW-focused firms have built books in the billions of euros. Many of them, without a doubt, have become wealthy. But few of them every become truly wealthy at a UHNW level themselves - or if they do, still work insane hours even late in their careers.

If we try to put this into numbers: Many of the UHNW advisors that I know work 50-60+ work weeks, which ends up bringing anywhere between 1M€ to 10M€ a year for their firms. But they don’t make that figure - in reality, they might get anywhere between 20-30% of those figures, split into their annual salary and their annual bonus. That is, without a doubt, still a very sizeable figure (200K€ to 2M€ a year, and I personally know advisors who’ve made more than this). But it can be even bigger if it was your financial advisory firm. 

If you go out as an independent advisor today, you typically pay between 10-20% a year either to a regulatory umbrella (Haftungsdach) or for a regulatory license of your own. That leaves you with 80-90% of your total revenues. Obviously, an independent setup does have some additional ongoing costs, which ranges from software (i.e. financial planning, Microsoft Office, etc.), to physical requirements (an office, mailing costs, etc.), to ongoing services (i.e. a virtual assistant, legal support, accounting firm, etc.). All of that tends to be marginal relative to the biggest cost, employees - which might be zero if its just you, but can be substantially higher the more complex your client service offering is.

But despite having to bear these costs directly, a well-run firm does end up with a more attractive margin. As a rule of thumb (especially from the US with a much more mature wealth management market), well-run firms have a profit margin of 40% before founder salaries - which of course could also be lower in favor of a higher year-end dividend, or vice-versa. For small, one-person setups, the figure could obviously be as high as close to the 80-90% per year.

And last but not least, and perhaps most important: Since it is your firm, you actually don’t just have your annual bonus, but actually build book or even equity value. If you ever want to leave the business, you might be able to sell your client book (typically 1-2x of annual revenues, esp. for mass-affluent clients who require less service). Or if it’s not just you (as the ‘key person’ with associated risks), you might even be able to sell your firm at a multiple of its profits. That is something that in my experience you don’t get working for a bank, where departure or retirement simply means that your book is transferred to someone else. And as many of you have likely seen, consolidation of independent advisors and wealth management firms is also coming to Germany now, meaning there is capital available looking to buy well-run firms like the one you might set up one day. (Whether the current approach to consolidation, especially focused on retiring advisors, is the right one, is another question - but I’ll share my views on that on another day.)

One valid counterargument to this of course is the speed at which you can build such a firm if you start from zero. Large firms without a doubt have benefits in regards to brand (everyone knows Goldman, JPM, and UBS, and wants to work with them after an exit), platform (ready for you on Day 1, central lead allocation, senior support, many back-office tasks outsourced to an existing team, etc.), and product (fully-managed model portfolios, access to alternatives, etc.). Chances are that things will take longer building all of those things, and your client book, from scratch. And going out on your own rather than as advisor at a large firm will likely be more risky - you might simply fail. But that’s the risk, and chance, of entrepreneurship - if things go well, you might end up with a much better outcome.

And while financial success is without a doubt an important factor, it might not be the biggest one.

You control your own life.

When I started out with my self-employment in 2023, many things were still unclear to me. But what I thought was clear to me back then was my goal: Work as hard as I can, and make as much money as I can, as quickly as possible. I did have a secondary (or perhaps fallback) goal, which was to make my old salary as a family officer. In other words, while I was aiming for the stars, so to say, I would still be happy if I made as much as I had previously made, but as an entrepreneur rather than employee.

And without a doubt, being financially successful is still a clear goal to me with Cape May today. But admittedly, my thinking has changed a bit: I’m thinking much more according to the second goal rather than the first one. I like to describe this with what I learned as “MIN-MAX” principle in one of my first business classes back at university: Raher than maximizing my input to make as much money as possible, or I focused more on achieving the ideal output under consideration of a limited (‘minimum’) input.

To make it more tangible - I didn’t want to work 80+ hours a week at all cost and see what output corresponded to that. Instead, I wanted (and want!) to see how big of a firm I can build, how much of growth in clients I can realize, with a given input. And admittedly while I did have some 60-hour workweeks in the past year, my day-to-day efforts are not only a bit more reasonable in terms of time and input, but more importantly don’t prioritize work at all costs. I can still pursue hobbies and spend time with my wife and friends. I work solely with clients to whom we can provide great value - and that in return are happy to work with us and happily pay us for our services. And its clients share my aforementioned mindset, for example by understanding that a request sent on the weekend will be answered as quickly as possible, which is likely first thing Monday morning and not over the weekend.

I won’t deny that more input (more emails, more client meetings, more newsletters!) does in many cases result in more output (more clients, more revenues, more readers) - I’m a firm believer in that as well, and it’s why I especially encourage young professionals to put in the hours early in their career. But now that I’ve worked in this industry or almost a decade,I know that this aforementioned approach, which my two co-founders also fully support, can and will result in an attractive financial outcome if we keep on doing as well as we are doing. There’s great examples of independent advisors who optimize their time even more aggressively (think 30-hour work weeks, or six months of vacation a year) and still generate a million or more of revenue a year.

All of this can be summarized in a simple sentence: I am in control of my life. I can serve the clients that I want to serve, and I can serve them in a manner that I deem appropriate, and that they appreciate and happily pay for. I can decide when and how I want to meet with them. And I can decide when and how I want to work. Take a half-day on Friday and make up for that on Sunday? Absolutely no problem at all. 

And I know from personal experience that that differs substantially for non-independent advisors. Different approach? Hard to align with the pre-existing approach of the bank or advisor you want to work with. Different work hours? Impossible at the junior level, and still rarely seen unless you are an extremely successful MD due to organizational pressure. Taking a ‘half day’ by leaving at 5 PM instead of 7-8 PM? Expect a have a nice afternoon from your colleagues.

I said it in last week’s newsletter - but it’s also something that I told someone about to become an independent advisor herself just before Christmas: Doing something you love to do, with clients who appreciate your work, is incredibly rewarding and energizing - and even if my hours this year were some of the busiest I had in a long time, I never felt stressed.

So to conclude 2025’s final newsletter: If you’re working in wealth management, private banking, or even an adjacent area, and are unsure whether you want to keep doing what you’re doing in 2026 - you should definitely, absolutely, consider a step into independent wealth advisory. You can set up your own firm. You can team up with other like-minded individuals, like I did with Markus and Tamara. You could also consider becoming a successor in an existing firm looking for someone to take over in a few years: Another very smart investment professional in my network has identified and chosen such a role for himself for the new year, and I have no doubt he will succeed - and in hindsight that is a path I also would’ve considered for myself rather than starting from zero.

Take the next few days (hopefully they are days off to you!) to reflect. And if it’s something you are realistically considering: Markus, Tamara and I are happy to share our experience - as are many other individuals in our network who have done the same. So if you are serious about it, and are looking for some first-hand advice from someone just getting started, don’t hesitate to reach out.

With that, we conclude Cape May Wealth Weekly for 2025. Thank you for reading this far, and once again, your support and interest - I look forward to being in your inbox again in the new year.

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