Should an Advisor Move When Markets Are Choppy?

Should an Advisor Move When Markets Are Choppy?

Letting fear govern your future is likely to result in a destiny you’re not happy with.

Volatility, according to Merriam-Webster, is defined as something that is “likely to change in a very sudden or extreme way.”

That’s certainly an appropriate descriptor for stock markets throughout August and September. We have repeatedly been asked if these unpredictable market swings have a negative impact on financial advisors moving to new firms.

The answer: A resounding “No!”

It certainly comes up in conversations with those considering a change, but it is most often just a passing thought. If you are an advisor who is truly unhappy or unfulfilled at your firm, using the current climate to delay what you really think is the right thing to do is an excuse born out of fear.

So, just as financial advisors counsel their clients not to let fear govern their decision-making process, we say the same to advisors. We remind them that market volatility is just a natural corollary to market investment. It should not determine an advisor’s future, particularly if he has deep client relationships and is confident that he always puts his clients’ best interests first.

Consider the latest Merrill Lynch breakaway: The father and son team who left the firm with their ultra-high-net-worth client base and $1.4 billion in assets. Steven Wagner and his son Michael realized that managing and reporting on the assets of their family office clients required more sophisticated tools than they had access to at Merrill. Staying put to wait out any market turbulence would have simply prolonged the inevitable and put their clients’ best interests at risk. Instead, they decided put their entrepreneurial DNA to work. They partnered with Dynasty Financial Partners, custody their assets with Fidelity and Pershing, and use Addepar’s reporting tool, giving them what they feel is the best possible solution for their clients. Amidst a market filled with uncertainty, the new RIA emerged as Omnia Family Wealth.

It’s déjà vu all over again

Looking back to 2008: Another tumultuous time—the worst market downturn since the Great Depression—and yet a Merrill team took $450 million in assets and broke free of a wirehouse they felt was failing their clients. The RIA they formed, LLBH Private Wealth Management, defied all odds and in just four years had $1 billion under management.

So what makes a team move when markets seem to be falling? The same thing that prompts a move when time are flush. As LLBH founding partner Jim Pratt-Heaney shared with us in a 2012 interview, “We knew what we wanted to do for our clients, but it couldn’t be done at Merrill because we were constantly being told that ‘If we do it for you, we have to do it for 17,000 other advisors.’” Frustrated by the restraints placed on their ability to do their best by their clients, the advisors moved on, carrying with them only one regret, “That we didn’t do it sooner.”

Take a lesson from history

In the worst days of 2008 and 2009, many advisors made the decision to change firms simply to take advantage of high-water transition deals; a wealth replacement strategy, of sorts, to make up for lost AUM, as well as the evisceration of their own portfolios. The upshot: Many advisors moved for the wrong reasons, letting fear be their guide, and now find themselves unhappy because they made a knee-jerk decision.

The best advice we can give to those advisors who are planning to change jerseys during this or any other turbulent time:

  • First, take a deep breath. Don’t feel as if you are held hostage by market conditions—positive or negative.
  • Learn the landscape, and keep an open mind as to the options that are available to you.
  • Trust your instincts, and make the decision to stay or go based on what’s right for you and your clients in the long term.
  • And most of all: Don’t let fear overtake you, and become the governor of your future.

Keep in mind that you have no control over market volatility, so instead make your decisions based on those things you can control: Your knowledge of the options available, and a clear vision of what’s best for you and your clients.

TAGS: Careers
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