It’s no secret that most advisors are enjoying a record year as markets continue to test all-time highs. Amid such tremendous success, it’s only natural for them to want to put their heads down and proceed full speed ahead with the status quo.
As one advisor put it, “I’m fat, dumb and happy. Why mess with what’s working?”
That’s a fair and candid question.
There is a case to be made for why an advisor might take some time to fix what’s not necessarily broken. It’s a smart business practice to periodically take a step back from the day-to-day minutiae to work “on” the business instead of “in” it.
What exactly does working “on” the business entail? For some, it’s as simple as asking yourself if your current firm is still the best possible home for your practice. Does your current firm allow you to serve clients unhindered, grow your business without limitation and earn a fair wage? For others, it involves conducting more targeted, strategic due diligence on the industry landscape.
Here are five reasons why it’s wise to do so:
1. To Have a Plan B—Even if You Never Use It
A good backup plan serves a few important functions. Foremost, it allows you to sleep at night knowing that in an emergency situation (whether that’s due to things like a personal compliance issue, an untenable change in firm policy or client demand), you can pull the rip cord quickly.
But an equally important side effect is that conducting strategic due diligence is a great way to ensure your firm is still the best home for you. If you explore other options and cannot identify one that moves the needle enough, you can stay put from a position of strength—knowing you’re in the best possible place for you and your clients.
For most advisors, the possibility of a move rents space in their head, but having a solid Plan B can help alleviate that by removing some of the unknowns and the trepidation that comes along with it.
2. To Identify if You Are Successful Because of Your Firm or Despite It
Advisors expect different things from their firms. Some prefer a largely silent partner that provides them with the resources and platform they need to run their business smoothly. Others demand more active support from management, referral mechanisms, growth opportunities and unique product and investment solutions. But in both cases, it’s critical to ask yourself if your firm is delivering the value you need from it.
The reality is that even if you prefer your firm to sit quietly in the background, it is doing so while taking a good chunk of your paycheck. So what is the real value you are gaining from it? Is your business growing because of your own efforts or because of the value the firm provides? At the very least, the firm should be fostering rather than hindering your growth.
3. To Determine if You Could Be Growing Even Faster Elsewhere
There could be an opportunity cost associated with staying put. While there is no such thing as a “perfect” option, what if another firm could offer the support needed to turbocharge your growth? At the end of the day, by accepting the status quo, you might be leaving chips on the table.
4. To Capitalize on the Battle for Top Advisor Talent
Recruiting deals are at all-time highs. While they show no sign of slowing down, we unfortunately do not have a crystal ball. If you believe you have a move in your future, you might consider doing so while a multitude of firms are willing to pay a premium for top talent.
5. To Protect Yourself From the Possible Consequences of What Happens if or When “The Other Shoe Drops”
Many firms have been telegraphing their intentions through recent policy shifts—changes to comp, heightened compliance scrutiny, and emphasis on recruiting junior salaried advisors in lieu of expensive competitive talent to name a few. And the truth of the matter is that as long as you are a W-2 employee, you must be comfortable accepting whatever changes come down the pike.
Consider, as an example, advisors who manage money for offshore clients. In recent years, several large firms made the decision to dramatically shrink their international footprint, leaving these advisors with a big decision to make: Shutter those accounts or move to a new firm that allowed them. For many advisors who chose to stay put, that choice resulted in a dramatic loss of revenue. While this is a rare and extreme example, it serves to illustrate the point that firms can and do implement policies that directly weigh on an advisor’s bottom line.
It comes down to this: Even amid periods of banner growth and production, exploration serves as a valuable exercise to keep you informed on the options in an expanding landscape. It need not result in a move; on the contrary, exploration can provide evidence that the status quo is the best option.
Yet on the other hand, bull markets don’t last forever. So while it may feel counterintuitive to even think about disrupting momentum when the going is good, it may be wise to do just that.
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.