While the thought of going independent is attractive, the wirehouses have the means and the brand to keep their up-and-coming advisors happy and at home.
Several years ago, the wirehouses were focused on “retention.” Between the financial subprime meltdown of 2006, the purchase of Merrill Lynch by Bank of America and the merger of Wachovia and Wells Fargo, the larger financial firms needed to put the focus on retaining the advisors they had. Meanwhile, their new advisor training programs went by the wayside.
But over the past year, the large firms have started to put an enormous amount of effort and resources back into their new advisor training programs consisting of workshops, mentoring, coaching and training.
Once these young advisors accumulate enough work experience, they may consider jumping ship and go independent, as they believe it provides a new level of freedom and the ability to keep more of what you earned. Don't count on it. Here's why.
Marketing Resources– In an environment where the individual investor has a lot of choices, it is imperative that advisors differentiate themselves and market their practices effectively. To do this properly, it takes resources, and the big firms have those resources. The wirehouses can provide websites for advisors, custom proposals, brochures, and best practices on conducting a top notch prospecting event.
Management– Big firms have managers, many of which are very talented. And these managers are making it a point to get in front of their advisors and ask, “What can I do to help support your practice?” Having a supportive manager who helps remove roadblocks and looks to partner in an advisor’s career can give the advisor a level of comfort and security that he or she might not get on their own.
Expenses of Running a Business– With independence comes expense, and many advisors don’t fully consider the tremendous amount of money and resources that go into running an independent business. In addition to one’s primary job as an advisor, he is also an office manager, human resource person, information technology department, etc. Big firms provide back-office support so the advisor can focus on what they do best: serving clients and marketing their business.
Wirehouses have the built-in credibility and established infrastructure that make it compelling for advisors to stay. And, as these firms continue to invest aggressively in their advisors, more and more will be making these houses a long term proposition instead of just a great place to jumpstart their careers.
Michael Silver and Eric Sheikowitz are the founders and partners of Focus Partners, a Paramus, N.J.-based coachingand consulting firm for advisors and financial services firms.