Brokers often take a shortsighted view of their careers, and this usually turns an effort to convince them to think about their own retirements into an uphill battle.
Indeed, given the average advisor's zeal to earn as much as possible as quickly as possible, it's often difficult to get them to take their eyes off the short-term benefits of a transition package. However, having seen hundreds of brokers change jobs, I can attest to one fact: Taking a long view on career planning is a rewarding endeavor, but it requires patience and a willingness to defer gratification.
The approach to transition planning varies according to each broker's length of service and industry experience:
EARLY-CAREER BROKERS
Early-career brokers are often in a hurry to cash out on their books so they can receive transition packages. This is particularly true these days, because packages have never been more lucrative. However, moving only for a transition package can be detrimental. Career moves need to be well planned; reputable firms shy away from hiring brokers who have moved more than twice in the past 10 years.
Recently, a broker from a regional firm, with $1 million in annual production and $100 million in assets under management, went shopping for what he hoped would be his “last” firm. This most recent move would be his fourth in 10 years. Every major wirehouse his recruiter introduced him to saw a red flag in his employment history. “Sure, he says this is his ‘final’ move,” said one branch manager, “but why should we believe him?”
The proffered transition packages reflected this wariness. One included only 40 percent of trailing 12-months production upfront, with the remaining 60 percent being earned only after he moved 80 percent of his assets. The 40 percent initial payment was not enough to cover the amount of money he would owe his present firm, so the broker opted to stay put.
Rather than move, some “rising star” brokers determine that teaming up with a more senior broker is a good career choice, particularly when a near-retirement broker expresses interest. This move has its pros and cons. For instance, one early-career broker went to a major wirehouse and almost immediately joined a team that consists of a very senior broker who gathers about $1.5 million in annual production. After a year-and-a-half, the broker is planning to leave the team and the firm to join another. The benefits he received included excellent mentoring and added credibility when his senior partner helped him pitch high-net-worth clients and CPAs. However, the broker feels that he definitely would have made more money had he “gone it alone.” This junior broker has been responsible for bringing in most of the new assets for the team in the past 18 months, and he has had to share every bit of production with the senior team member at the rate of 50 percent.
Recently, he accepted a position as a financial advisor with a wirehouse, where the branch manager has made a commitment to helping him grow his business, pay for marketing seminars and help him pitch clients. He no longer will be required to split his production and his new branch manager will give him the credibility he needs.
Here's the kicker: Even though the young broker cannot move any of the assets he has helped accumulate (they are in the senior broker's name), he places a high amount of value on the training he received. As painful as those 18 month might have been financially, they prepared him to be a much more successful advisor in the long run.
MID-CAREER BROKERS
Mid-career brokers who possess a consistently growing asset base are highly sought after by recruiters and competitive firm branch managers. Among the most attractive are brokers who have some tenure at a current firm. The ability to have resisted the temptation of large transition packages speaks to the brokers' professional maturity and to their ability to think strategically — two qualities not easily found in the brokerage industry.
I know a few of these creatures. One is a financial advisor with a major wirehouse. He and his partner have been a team for 12 years. Together with their administrative assistant and a planned new-hire trainee, the partners have made the decision to stay at the wirehouse, even though they have had a front-row seat to the recent parade of colleagues changing firms, grabbing big fat checks in the process.
Despite these temptations, he and his partner both feel their momentum would be compromised by at least a year if they spent the time it would take to negotiate a team move. They are not opposed to a jump — just patient enough to wait for the right opportunity.
This team is going to be valuable when they decide to make their move. One thing they will need to do is research opportunities at competing firms every few years, because this is the most likely way the right opportunity will reveal itself.
IMPENDING RETIREMENT
Many brokers planning to retire in the next several years might think their only option is to sell their business to a younger broker partner, but in fact there are other choices, including:
Go to a major firm as part of a “sunset” plan. You will be paid a handsome transition package based upon your trailing 12-months production. The move is made, however, with an eye toward teaming up with a new partner and new firm for the years you expect to stay in the business. At retirement time, your book will transition to another broker or brokers as was predetermined. This plan enables you to do the slow fade, and to get paid again when you sell your book to your teammates.
Go independent a few years prior to retiring. This has become an increasingly popular scenario. You have been a W-2 employee for 25 years or more. You have grown tired of the hassles at your present firm and of the changes that seem to come at the whim of the branch manager. You seek a different quality of life. Hopefully, you acquired a good transition package because you moved firms at least once at mid-career and are now looking to buy your freedom. This plan will allow you to sell all or part of your book at retirement time on the open market for a minimum of two times your trailing 12-months production.
Whether you are early-career, mid-career or nearing retirement, there are many options available that can help or hurt a career. But all of the best ones have one thing in common: The brokers who take the long views tend to do the best in the end.
Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting (www.diamondrecruiter.com).