January is a month for making resolutions in all areas of your life. Make one now to take a realistic assessment of your current career situation — to evaluate where you are today against where you'd like to be longer term.
Here are two questions every advisor should ask himself periodically:
Are there things that are frustrating me here that won't ever improve?
Are there things that I would like to accomplish or ways I would like to reinvent my business that I am unable to do at my current firm?
If the answer to either of these questions is “yes,” then it may be time to take some action. Changing firms requires active due diligence and patience. It's often inertia or fear of change that prevents advisors from exploring other opportunities.
The most common justifications for plodding along in the face of mediocrity or discontent go something like this: “I am waiting for a change in my current situation and/or until my gross production reaches a certain level”; “I assume it is the same everywhere, so I might as well stay put”; “I simply don't have the time”; or “I want to move, but I have bonuses and stock options coming due next year.”
Sound familiar? Perhaps these justifications fit in your case. Maybe it is not the right time to actually make a move, but it never hurts to take a fresh look at your situation and assess your options. If you don't, there is potentially a great deal to lose.
Here are some things to consider:
When your length of service goes up but your production does not, you become less attractive to a new firm, which could mean a smaller transition package.
With recruiting deals at an all-time high, it is taking firms much longer to break even after the recruitment of a broker. Deals will not always be this rich.
You have a saleable asset and it makes good sense to cash out on your book at least once in your career. This is not to suggest that you should change firms every time your contract term is up or that you should move just for the money, but if there is pain in staying, then capitalizing on the deals being offered now can be a smart business decision.
The Cost of Waiting
Jack is a perfect example of how waiting can hurt you. Jack had been working with for a small regional firm in Connecticut for more than five years when he was contacted by a recruiter in 2003. At the time, he was producing about $450,000 annually on $48 million in assets. Although Jack was offered almost $675,000 in upfront cash, stock options and back-end incentive bonuses by several firms, he decided to wait because he stood to inherit $50 million from a broker who was planning to retire.
Fast-forward three years. Jack's production has remained flat and his assets under management have actually decreased by $5 million. Lack of access to a solid fee-based platform, poor technology and his firm's weak brand among high-net-worth clients have made it difficult for Jack to build his business. Meanwhile, he is still waiting for the senior producer to retire. Thing is, in the intervening years, plenty of reps with similar industry experience at competing brokerage firms have seen their own production grow 50 percent to 100 percent. This means that Jack is no longer considered a top-quintile producer and can't command a first-rate transition package.
The Brighter Side
Now consider Ben, a broker who has been with his current firm for his entire 22-year career. Ben produces around $750,000 on $80 million in assets. His business is primarily fee-based, and he has a clean compliance record. Although he currently has a good manager who has bent over backwards to support him, every day he feels that his firm is changing for the worse: It now has over 15,000 advisors, and the bigger it gets, the less access he has to top management and product specialists and the more time it takes to get answers to his clients' questions. But, he has taken the view, like many brokers do, that his loyalty will eventually pay off.
In many industries, Ben would be right, but not in the brokerage industry — the only industry in which you can sell your business and still own it. If you do not make at least one well- timed move during your career, the only one getting rich is your firm. Additionally, the landscape of the industry has changed dramatically in the 22 years that Ben has been a broker. Today, there are many different ways to function as a financial advisor that did not exist two decades ago: An advisor can be quasi-independent, fully-independent or can work for a bank or credit union, a wirehouse, a regional or boutique firm or a family office.
Initially, when approached about pursuing other opportunities, Ben responded, “I don't have the time. I barely have enough hours in the day as it is.” As Ben was to learn, this was the shortsighted view. After several more months of grinding it out with his firm, Ben became willing to explore other opportunities. Today he is in the process of weighing transition offers from firms that have entirely different cultures from his current firm, plus fewer advisors and solid branch management. Although he is taking into account the hassle of moving, Ben recognizes that the short-term pain will be far outweighed by the long-term benefits of happier clients, higher compensation and better quality of life.
We all know that our habits of procrastination are hard to break. But, the rewards for breaking out and taking action are high. Take the same advice you give your clients with regard to risk tolerance — “No risk, no reward.”
Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting www.diamondrecruiter.com