For an RIA, onboarding a wirehouse advisor or advisory team and incorporating them into your firm is an intriguing concept, but seems daunting to most. The biggest question RIAs always have is, “Where do I begin?” There are often so many unfamiliar nuances to this undertaking that advisors give up before they even start. Despite these uncertainties, the benefits of liberating a wirehouse advisor into your firm can far outweigh the hassle of the transition itself. Some of these benefits include the added AUM with newly transitioned clients, new thought leadership, and a reinvigorated business development culture within your firm. Achieving synergies is not impossible – all it requires is a well-developed process.
The first step an advisor should take is to educate themselves on the language barrier between the wirehouse world and the independent RIA channel. While wirehouse advisors are familiar with “Production Credits,” you are more accustomed to speaking in terms of “Revenue.” While they are comfortable discussing their “Payout Grid,” you know the specifics of “Profit Margin.” Getting on the same page in terms of what you are discussing is necessary in order to have any kind of productive dialogue.
The second thing an advisor must consider once deal terms have been negotiated is where this new advisor or advisor team is going to work from. Onboarding an existing RIA is relatively simple compared to onboarding a wirehouse advisor. A wirehouse advisor will need new office space – whether that is in an existing space the RIA leases or a new location, it is key to identify this early on so there is enough time to source real estate and outfit it with the required office necessities.
Helping wirehouse advisors feel comfortable with your RIA’s back office infrastructure is also essential. They need to understand that they will work with systems that will enhance their clients’ experience, and that the technology in the independence space offers flexibility depending on clients’ needs. They should understand that the custodian they will be transitioning their clients’ assets to is safe and most likely already well known by their clients.
There are certain aspects of transitioning a wirehouse advisor that require much thought and sensitivity. First and foremost, confidentiality of the wirehouse advisor’s information is of the utmost importance. If their details are shared or if their branch manager discovers their intentions, they will have violated their employment agreement, and there is always the Broker Protocol to take into consideration. It’s also imperative to have contingency plans in place should either party think their intentions have been leaked to anyone that could lead to an early transition.
Once a wirehouse advisor or team transitions into your RIA and their clients’ assets have moved, the promised synergies can begin to align. Advisors from the wirehouse space have reputations for their ability to market their services and gain new potential clients, which can be taught to legacy employees at the RIA. In kind, the RIA has access to open architecture and investment solutions that will replace the antiquated proprietary options the wirehouse advisor had at their old firm. They will have new, creative freedom with the types of client events they can host to express appreciation. Once the process of onboarding a wirehouse advisor is complete, all that’s left is the enjoyment of learning and sharing of cultures while your newly-merged firm continues to grow.
Onboarding John’s Wirehouse Team into Kate’s RIA*
Kate followed the above process when she considered acquiring a wirehouse team into her 8-year old RIA. Kate, who managed well over $1 billion in AUM, was once an advisor within a wirehouse before transitioning into independence and knew of the obvious benefits joining forces with another team could add to her business. When she was introduced to John, a wirehouse advisor with under $500 million AUM, they took the time to understand each other and what they were individually looking for in a partnership. Kate and John were able to have open conversations about how John could transition his book of business into Kate’s existing RIA, and how his staff would complement and integrate with Kate’s team.
Kate had recently upgraded to new office space, with the intention of eventually finding a partner that could join her. She also had a dedicated operations team that helped educate John and his team on the existing reporting, CRM, and financial planning platforms. When John inquired about trading capabilities, one of Kate’s specialists was able to walk John through their rebalancing software, which they access via their reporting system. Kate had her custodian join the conversation to assure John that his clients’ assets would be safe, and detailed the features and benefits his clients would experience once they moved their accounts.
Throughout the transition process, Kate and John refrained from using email and communicated solely through a secure portal. They were able to share documents pertaining to the transition without risking an email being forwarded to an outside party or a document with John’s name and details being accessed by a third party. When it came time for John to resign from his former wirehouse firm, Kate had her office prepared with all client onboarding documents and the vetted workflow process.
Ultimately, both John and Kate are happier and more successful with their merged firm. John has greater freedom to service his clients in the RIA space, and Kate has been able to leverage John’s refreshing business development concepts. They have integrated their support staff into one team, and with John’s more aggressive prospecting experience, they have been able to grow their RIA by 13% in its first year of merged business.
*This description of Kate and John’s success is based on a true story of two firms merging into one, but names have been changed for confidentiality purposes.
Anna Maria Garcia oversees the formation of both office infrastructure and RIA infrastructure for breakaway advisors at PFI Advisors.