Registered reps serving multiple high-net-worth clients typically benefit from a benign domino effect.
In many cases, an affluent-focused practice has its origins in a single client; if the rep does a good job serving that client, his actions set in motion a string of events that often end in referrals to other wealthy individuals.
This is the point at which many brokers look at their firms and start to think about moving on. They want access to a more sophisticated array of products, services and support. But there's a catch: Relatively few reps are appealing to the sorts of firms that would provide such gilt-edged support.
As such, those with books made up of fewer affluent clients need to understand the limitations of their current books of business and must open their eyes to new options.
Boutiques and the Average Broker
If my experience is any indicator, there's a trend brewing among brokers with nascent high-net-worth books. Increasingly, these reps are not interested in making a lateral move to a wirehouse, preferring instead to hold out for “something unique,” like a position at a firm whose brand resonates with the ultra-wealthy — Bear Stearns or Deutsche Bank or Goldman Sachs, for instance.
Unfortunately for many reps, these firms achieved their elite status by being very choosey. They typically seek brokers with gross annual production of at least $500,000 to $1 million, a minimum of 40 percent fee-based business, a squeaky-clean compliance record and a pedigree from a major firm. They also like brokers whose total asset base is made up of a small number of large clients.
So how do you get there? Some of the elite firms may be willing to recruit a broker who is not “there” on all fronts, but who has verifiable contacts in the ultra-affluent world.
A good example comes from a broker who has been working for a second-tier firm (with less prestige than a bulge bracket firm) for his 20-year career. He produces in excess of $1 million a year and has $100 million in assets under management. His compliance record is clean, but his book is transactional with few fee-based assets. His client base is primarily elderly, with average investable assets of less than $1 million per household, and in some cases less than $100,000. He never thought about a move until recently, when he fortuitously connected with an ultra-wealthy prospect whose sophisticated investment needs are very different than those of his usual clients. His current firm absolutely cannot provide him with the depth of resources he needs to service this ultra-affluent client, like alternative investments and sophisticated credit and lending services.
Because of his business mix and client base, he is not a shoo-in at a firm like Goldman that focuses on the ultra-affluent. He needs to resolve conflicting goals in his search, such as:
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Finding a firm that will best help him service ultra-high-net-worth clients, their friends and their referrals.
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The ability to service his existing client base, at least for a time.
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Receiving the most lucrative transition package possible.
Even if one of the firms will take him, he needs to be sure that the mentoring and training he needs is available. This includes sales and client-development training for the new firm's products and services, and tips on how to approach prospective clients at a level he has never served.
A firm's cachet does not make up for a lack of mentoring, and boutique firms often are lacking in that department. Meanwhile, wirehouse and regional firms have the resources he needs — excellent technology and managers willing to teach. They will allow him to continue to serve his existing less affluent client base into perpetuity, while a boutique firm would eventually force him to give up his loyal, long-term clients, many of whom have become friends.
In the end, then, while the wirehouse firms may have less cachet with the ultra-affluent than the boutiques, the former will provide, overall, the far better choice.
Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting. www.diamondrecruiter.com