I, for one can work for both agencies and direct clients, depending on the rhythm of offers and the rates. It is best though when you have clients that you have got to know for some time, that you communicate with and that you respect..
Now, what about rates. Some Translation Agencies are notorious for their low rates. Of course we all know they are just "middlemen" and must take their "commission" (well, it's more complicated than that, what with editors, proofreaders, project management, etc...), but still sometimes, it's just too much!
On the other hand, getting Direct Clients will probably require more marketing savvy, negotiating skills, even a modicum of "entrepreneurship"
Apart from doing translations for an agency in Geneva when I was a student, I have always translated freelance. The agency paid correctly but was not very well organised, so it always offered translations "for the day before yesterday".
I agree about the need of marketing savvy, negotiating skills and entrepreneurship when you are a freelance: I joined this network because I lack these capacities. My inkling is that marketing translation capacities does not always follow the general rules of marketing.
For instance, translation is not the same as other better defined trades: if you are a qualified plumber, you can do all plumbing jobs. But even if you are a qualified and experienced translator, some texts won't be within your knowledge range. If you work freelance, you have to quickly decide whether to accept the job and spend the needed time on unpaid research, in the hope that the client will call you again, or to refuse.
Or to find creative alternatives: in 98, my main niches were literary essays and social psychology. I got a phone call from someone at a vocational training institute, who had got my name through a common friend: they urgently needed translations of texts dealing with "the use of ICT in training" for a distance learning project. I hadn't a clue what ICT was. He explained it meant "Information and Communication Technology, the internet etc". I said they'd better find someone else as it really wasn't my field, but they didn't have time to do that. So I accepted the job on condition I could ask about everything I didn't understand. And that's how I got my training - and recognised competence after a while - in my present niche ;-)
However, that first "ICT in training" translation took me a lot of time, so proportionally, the pay was really meagre: it is not something you can do regularly.
Maybe the solution to the problem would be to research the most profitable niches and "dominate" them, i.e. know them so much that you become literally indispensable! As the "recognized authority" on ICT translation I think getting work shouldn't be too difficult. Of course this would mean making it "abundantly clear" to your target market (and even beyond it) that you are literally "the One and Only".
Now you say payment was meagre in relation to all the time you spent researching. I would call it "delayed" payment: it will come, sooner or later because of your expert status. Besides, don't they say that "the cool thing about knowledge is that no one can take it away from you :-) "C'est toujours ça de gagné!" (Do you use this expression in Switzerland?)
So before we decide to select any niche and really, really specialize, we must first make sure it is really worth it! And of course it's possible to have more than one niche (that's why I put the word in the plural in the preceding paragraph)
Well, that's my 2 cents for the time being, anyone wants to add something ;-)