WealthManagement Magazine

What Size Pond?

It is an article of faith in recruiting circles that wirehouses are practiced in the art of brainwashing. The target of their mind control is advisors. The message: the firms' reputation is the central factor in any success the advisor might attain. It's all part of an effort to establish the firm's ownership of the clients, and advisors often buy into it in more ways than one. For instance, many

It is an article of faith in recruiting circles that wirehouses are practiced in the art of brainwashing.

The target of their mind control is advisors. The message: the firms' reputation is the central factor in any success the advisor might attain. It's all part of an effort to establish the firm's ownership of the clients, and advisors often buy into it in more ways than one.

For instance, many brokers believe that their firms' great reputations all but guarantee them a decent business. As long as they have a client base, a telephone and access to a reasonable product platform, they can and will be successful, the thinking goes.

In fact, in my experience as a recruiter, most clients are more loyal to the broker than they are to the firm.

Still, that the firm's reputation does matter is in the realm of prospecting. It's startling how much sway a big firm's name can hold over a prospective client. I've seen many successful advisors founder after moving from a wirehouse to a smaller firm. The reverse is also true — average advisors at smaller firms who jump to wirehouses often see a big jump in production within the first two years, in large part because the firm's reputation helps them land clients.

Levels of Success

This doesn't mean advisors cannot do well at small firms.

Advisors working for less-well-known firms can make a killing with niche practices, such as those at J.B. Hanauer, which specializes in fixed-income products. The firm is well known for its bond inventory, and its brokers are often very successful. But for the most part, the firm's clients do not use their advisors for estate planning, for comprehensive wealth management or for implementing sophisticated credit and lending strategies. Wirehouse brokers, who have access to a wider range of services, typically handle those tasks.

For advisors on the make, though, the resources and deep pockets at wirehouse firms are often the best bet. For example:

A broker with 10 years experience, working with a relatively small and lesser-known boutique firm in Chicago, has done well, producing $900,000 in trailing 12-months production with $95 million in assets under management, and a clean compliance record. He has a completely transactional book of business, not fee-based. His level of success never gave him any reason to go looking for a new business model. However, as his comfort level at his firm began to fade, he looked at some other firms and he soon found that he had been handicapped by a limited product platform and inferior technology. He moved recently to a larger firm, where he is joining a team and hopes to hit $2 million in production in short order — simply because of the changed environment and the improved resources the new firm offers him.

An advisor with 12 years at a small, two-office second-tier brokerage firm is a relatively large producer by his firm's standards, with $500,000 in trailing 12-months production. It never occurred to him that the firm's lack of name recognition was holding him back. His success thus far has largely rested on his ability to land clients through cold calling, but he has always found this difficult because of his firm's semi-obscurity. Once he meets prospects, the advisor has always had a large amount of success in landing them as clients. He is not getting in front of enough prospects because they think his no-name firm is second rate, regardless of the fine work he could do for them. After just a few meetings with a wirehouse, he is prepared to make the jump. He now realizes how underpaid, overworked, overstressed and handicapped he has been by his current firm. The lack of technology, sales assistance and a full suite of investment products have worked against him — as has his firm's low profile.

These two examples highlight the importance of finding a firm that is a good fit for your particular goals. In many cases, small firms work well. For advisors looking to expand their books aggressively, larger firms are often — but not always — a good option.

The first step is to start asking questions. The answers may surprise you.

Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting (diamondrecruiter.com).

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish