Some financial advisors chose to change firms frequently. Many people assume they
do it just for the money — and a
lot of money can be involved.
In my experience working with
advisors, though, money is rarely
the prime motivator. Usually, the
advisors have a business problem
to solve that can’t be addressed at
their current firms.
It’s worth noting that the “
highest bidder” is not always the winner
when it comes to capturing advisors. In many cases, the advisor selects
the firm that offers a new business model
or better support.
The advisor’s goal is to build a practice
with superior growth prospects. Upfront
packages can influence the decision when
an advisor is reviewing competitive offers. But the long-term outlook is even
More Pros Than Cons?
Prudent advisors understand that moves
demand lengthy preparation efforts and
can be stressful. Though these shifts can
help them grow, moves aren’t risk-free.
There are often surprises, and sometimes
advisors can lose clients in the process.
Support is a big attraction. Both young
up-and-comers and established pros managing vast pools of assets are attracted
to firms that will front the cost of junior
brokers or other team members.
These key hires can often be the catalyst for a boost in an advisor's business.
I worked recently with an advisor team
that opted to join a major firm that rejected a bigger payday in favor of a deal
that promised to hire and fund two junior
brokers, for instance.
Advisors often expand their business
by selecting firms with deeper, richer
product offerings. In recent years, many
advisors have done more business with
existing clients by gravitating toward
firms with services such as lending and
alternative investment options.
In the transition process, advisors
make interesting discoveries that can help
them improve their business and deepen
their relationships with clients. When
they move and open accounts at a new
firm, advisors must qualify clients anew.
This exercise often leads to the detection of fresh needs or assets. Some
advisors use the move and the superior
capabilities of the new firm as an opportunity to encourage clients to consolidate
their assets with them.
I've worked with a number of advisors over the years who've used
the cash cushion from a lucrative
recruiting deal to tweak their business models. One advisor, for example, wanted to shift away from
a commission business to a more
He joined a firm that allowed
him to run money on a fee basis
in one of their broker-as-portfo-lio-manager programs. He was
confident that he'd be successful
converting his current clients to the new
fee-based format, and he wanted to expand
his practice by attracting new clients and
working with them in the new format.
During the transition, the rep decided
to use part of the signing bonus he received by joining the new firm to fund
some expenses related to taking time
away from current accounts to prospect
for new clients. He wisely used his signing
bonus to fund the growth of his practice.
Another advisor deftly used a signing
bonus to buy the book of business of an
older advisor with whom he'd recently
Taking advantage of hefty recruiting
packages, of course, has its place. When
most advisors move, they do so to take
their business to the next level. That's
the way it should be.
Mark Elweig is an executive recruiter who has
worked for three decades with advisors at
wirehouse, regional and independent firms.
The Best Reason to Change Firms
By MARK ELZWEIG