By Jeff Nash
The advisor transitions market has recently become more active, with independent broker/dealers devoting additional resources to their recruiting efforts — including a surge in creative dealmaking. As recruiting deals become more complex, advisors are naturally leaning on expert opinions from transition professionals to help them evaluate their options.
But that can lead to problems for advisors who don't have an appreciation of how these professionals approach their job and what motivates them.
In-House Recruiters: Good for Specifics, Not the Big Picture
Frequently, advisors on the cusp of a move quickly dismiss in-house recruiters, believing that such professionals are focused only on the number of recruits they can win, not whether there’s a strong cultural and long-term fit for firms and advisors.
Advisors shouldn't use an in-house recruiter as a substitute for conducting due diligence on a potential partner. At the same time, it's important to remember that in-house recruiters can be quite useful when it comes to answering specific questions about their firm and filling in other important information gaps.
They can be particularly helpful at two distinct points in an advisor’s transition journey: first, during the preliminary stages, when they can provide a sense of a particular firm's key selling points. Then later in the process, once a potential recruit has gathered their thoughts and compiled a comprehensive list of firm-specific questions, they can act as a resource to better inform the decision-making process.
Third-Party Recruiters Versus Third-Party Consultants
Some advisors, once they have decided to make a move, feel they need a third-party expert to guide them. This is where the situation can get tricky, mainly because many don't start by asking one pivotal question: Is this professional a third-party recruiter or a third-party consultant?
Certainly, there are similarities between the two. Both are usually paid by the broker/dealer or custodian in which they successfully direct advisors. Both tend to work with several firms at the same time to provide transitioning advisors with a few different options. Lastly, both will generally help advisors negotiate the financial terms associated with their move.
But there are differences as well, and those are crucial. Recruiters typically view transitions as a transaction, pure and simple, measuring success primarily by how quickly they get an advisor from one firm to another and how much the advisor receives in financial compensation.
By contrast, consultants tend to take a broader view, spending considerably more time with the advisor, both before, during and after the move, emphasizing business planning as much, if not more than, the pace at which a transition can be finalized or how much money is involved.
What Kind of Professional is Best?
It's relatively easy to distinguish between recruiters and consultants based on the following key questions:
- Does the professional stay involved beyond the initial introduction, remaining a trusted and accessible resource until every final detail of the transition is fully executed, from start to finish?
- Does the professional make an attempt to understand an advisor's business plan or growth strategy then make suggestions based on what they learn to help them align with the right partners?
- Do planning discussions between the professional and the transitioning advisor transcend financial considerations and encompass a broader set of factors, including regulatory concerns, the synergies between existing and potential wealth management platforms and succession and contingency planning resources?
If the answer to the above questions is "yes," then the professional is a consultant, not a recruiter.
With that said, the consultant relationship is not for everyone. Just as do-it-yourself retail investors are better off with a discount brokerage versus a full-service financial advisor, transitioning advisors who are interested primarily in moving quickly and making the most money are best off with a recruiter, not a consultant.
However, independent advisors who view a firm change as an opportunity to revisit and refresh their broader strategy, and prioritize holistic considerations such as culture and capabilities are almost certainly better served by a consultant model.
In today’s landscape, advisors considering a b/d change need to start by identifying what kinds of professional expertise are out there to help with their transition and decide what support models best suit their business needs.
Jeff Nash is President and CEO of Nash Consulting Group, a practice management and advisor transitions consultancy firm.