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The Decision Guide: Simplifying the Due Diligence Process

If done with forethought and a step-by-step approach, the due diligence process around a potential move becomes far more manageable.

It’s a sad story, really—one you’ve heard before and, if you speak with enough advisors, you’re likely to hear again. It goes something like this: An advisor is unhappy at their current firm, but for one reason or another they feel stuck, inertia takes over, or they get overwhelmed by the prospect of a move, so they stay put.

Ultimately, they dread coming to work each morning; their clients are perhaps not as well served as they otherwise might be; their support staff is miserable; and so on and so forth.

How does it come to this?

To many advisors, the sheer thought of conducting due diligence—let alone even consider the heavy lift involved in a move—is filled with dread. Due diligence can be downright daunting.

But if it’s done with forethought and a step-by-step approach, the process becomes far more manageable.

After decades of working with advisors, we’ve identified a simple framework for due diligence based on strategic and focused intent, empowering advisors to make informed decisions and limit overwhelming feelings.

The calculus of a move typically comes down to three decisions, made in this order:

  1. If you are going to move,
  2. Where you are going to move to, and
  3. When you are going to move.

Decision 1: Are you unhappy enough or curious enough to explore options and consider a move?

Conducting strategic diligence does not mean you will ultimately make a move. It simply means that you are getting educated on what the landscape looks like. It also does not mean haphazardly taking meetings with any firm in your Rolodex.

So, what does it entail? Step 1 is to get educated on the landscape of possibilities and do some real introspection about how you want to live your business life in the future. For some, this simply means doing homework on their own (“armchair exploration”) or with guidance from an experienced recruiter. Others may want to dive into taking meetings with various firms.

In both cases, the diligence process continues until one of two inflection points is reached: Either you find something “better enough” to continue down the path, or you halt the process and recommit to your current firm knowing it’s the best place for you at present.

Another benefit of getting educated is creating a “Plan B.” We live in a world of heightened and heavy-handed compliance, and ever-changing management mandates at the big firms, so advisors take comfort in having a backup plan at the ready.

Decision 2: Where do you want to go?

Answering these questions will help guide your thought process:

  1. How much transition money do you need/want?
  2. How important is a name brand?
  3. What is your biggest frustration that a move must solve for?
  4. What facets of the business do you enjoy/want to keep control over?
  5. What does your current firm do really well that you would like to replicate?
  6. Are you entrepreneurial and does the notion of independence appeal to you?
  7. If so, how entrepreneurial? How much support do you need?

The questions above are not the be-all and end-all. They are intended as a framework to steer your thinking. For example, if maximizing transition money is critical, independent options are perhaps not the right fit. If you are frustrated with the lack of control and management bureaucracy and desire more freedom and flexibility, then it makes sense to look outside of the traditional wirehouse space. 

Decision 3: When do you pull the rip cord?

This decision boils down to personal preference to some extent, but there does appear to be a happy medium. For most advisors, you want enough time to be thoughtful, thorough and well-prepared for the big day, but not so much time that you feel like a person floating between islands for an extended period.

For example, it can be hard to prospect for new clients once you decide to make a move, since it might feel disingenuous. Plus, you are likely to be excited about the new option and prolonging the move will mean keeping the secret that much longer.

While there is no right answer, a well-planned move typically takes a minimum of six weeks from the time a decision is made, barring extenuating circumstances.

Advisors who might otherwise be better served elsewhere are stuck only if they choose to be. But the reality is that inertia is a powerful force.

Is it best to stay put and “make it work?” Or would you take the time to investigate what else is out there?

Jason Diamond is vice president, senior consultant of Diamond Consultants—a nationally recognized recruiting and consulting firm based in Morristown, N.J., that focuses on serving financial advisors, independent business owners and financial services firms.

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