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Advisors Considering a Move: Begin With the End in Mind

It's imperative to embark on due diligence with clarity about your end game.

Most advisors focus their due diligence efforts on what’s best for the business today—a process that may solve short-term concerns but doesn’t always lead to the best solution for the long term.

Selecting a firm or model based on what’s right for the business as it currently stands is important, but understanding how that choice impacts the longer term may actually play a more critical role in the vetting process.

It means having clarity around what you are looking to solve for in the near term, as well as what you want the end game to look like.

By beginning with the end in mind, advisors can better align the pros and cons of each option and their impact on bigger-picture goals.

Taking a Step Back to Imagine the Future

To gain clarity around your goals means stepping back and being brutally honest about your business as it stands today and what you want it to look like tomorrow.

That’s why we ask our advisor-clients to start with a self-assessment (a subset of which is available here), designed to help them take an objective view of their business life. The insights gleaned enable them to create a clearer picture to assess each option before them.

For example, consider Stacey, a 45-year-old wirehouse advisor with an extraordinary business and a long runway ahead of her. For the most part, she feels well served at her firm, managing almost $1 billion for high-net-worth clients. But over the past few years, as some of the flexibility and control she enjoyed slipped away and she watched other colleagues leaving the firm, she wondered if she was in the right place to serve her clients and grow her business.

As such, Stacey reached out to me for help. She was grappling with whether she should ultimately stay or go, and if she were to make a move, to determine what the ideal home would be.

With such a spectacular business, the wealth management landscape was Stacey’s proverbial oyster—making clarity around her future goals crucial in narrowing down the choices.

So I asked her to answer two threshold questions:

1. What Do You Want Your Business to Look Like Five or 10 Years From Now?

“My goal is to get to $2 billion in assets in the next two to three years and to continually up the ante in terms of the services we can offer our increasingly high-net-worth clients. I expect that at least one of my sons will join the team, and I am really excited about that.”

2. What’s Your Desired End Game?

“While I have no intention of retiring anytime soon, I want to be able to look back and say I built a really special business—not only $5 billion-plus in AUM, but one that is recognized for its integrity and superior client service. There are aspects of independence that are super appealing, but I’m not 100% sure I’m ready for the heavy lift.”

Knowing that, I asked Stacey to visualize three possible paths that she could take. In doing so, we could outline the pros and cons of each—and connect the dots between potential options and the impact on her goals.

Stay the Course

Staying with her current firm is the path of least resistance.

The positives:

  • There’s no disruption to the business, plus it’s familiar and comfortable.
  • By remaining loyal to the firm, top advisors often get added perks—like distribution of accounts from departed advisors and access to programs that reward them for their loyalty.

The negatives:

  • It doesn’t solve for what has been identified as frustrating—in her case, too much bureaucracy and diminishing control.
  • The real possibility that things will change significantly at the firm during what’s left of her professional lifetime and the potential of being “stuck” with little optionality.
  • Increasing vulnerability—as firms become more hyper-compliance-focused, even top advisors are subject to termination for non-sales-practice violations.

The long-term view:

  • She can retire-in-place through her firm’s built-in succession program.
  • Next-gen inheritors can buy her business, but they won’t ultimately own it.
  • Her momentum is likely to continue without interruption.

Move to Another Firm

Like many others, to Stacey, the thought of shifting to another big brokerage firm seemed like a lateral move, with the possibility of trading one set of problems for another. But she found it intriguing to consider boutique firms like First Republic Private Wealth Management and Rockefeller Capital Management.

The positives:

  • The transition deal—while making a move for the money should never be the sole reason, today’s high-watermark packages can be quite an incentive.
  • A built-in, legitimate referral mechanism—like at First Republic—offers greater potential for accelerated growth.
  • A flat organizational structure provides more access, control and freedom than a big firm—and the bonus of a community of like-minded advisors.
  • At a multifamily office like Rockefeller—with $75 billion in buying power—she would see opportunities not available to her wirehouse counterparts.

The negatives:

  • Any move means disruption and risk, and that can impact her momentum.
  • It may not be “independent enough” for her.
  • She would not have the ability to self-brand and market freely.

The long-term view:

  • The quality of her professional life would be better because she would be a bigger fish in a smaller pond.
  • She would have the opportunity to move once and monetize twice: first on the way in via a significant recruiting package and again when she looks to exit the business by leveraging the firm’s retire-in-place program.

Go Independent

If building a legacy and a salable enterprise is the goal, then this option must be up for consideration.

The positives:

  • It is the ultimate in control—an opportunity to build a business that most closely aligns with any and all goals, free from conflicts.
  • Provides the ability to create an enduring legacy designed with the next gen in mind.
  • The most customized way to serve clients—with true open architecture and the ability to “shop the Street.”
  • Offers better take-home economy—with the option to create additional revenue streams through value-add client services.
  • Can build equity and true enterprise value that can be monetized with preferential tax treatment for significantly more than she could in the traditional brokerage world.

The negatives:

  • Business ownership is not for everyone and even with a tremendous ecosystem designed to support breakaways, many advisors prefer the familiarity of a big firm.
  • The need to be long-term greedy—some advisors are not comfortable betting it all on future potential.
  • There’s no meaningful way to monetize in the short term unless you sell a portion of your business.

The long-term view:

  • She can add inorganic growth to the mix and recruit and acquire other businesses—which can have a profound impact on expanding operating margins.
  • If Stacey runs an efficient and scalable enterprise, she will be rewarded with a higher valuation at the end of the day.
  • She’ll have her pick of potential buyers for her business—ranging from an internal buyout to an unlimited number of strategic and capital acquirers.

Stacey’s story is not unlike that of many other top advisors. Her business could thrive in any one of these scenarios. But in looking toward the future, there are some key differences between each and how they align with her goals. That’s why taking the time to understand the full implications of any move in both the short and long term is critical to paving a path to one’s best business life.

Mindy Diamond is CEO of Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.

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