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How to Evaluate a Firm Beyond the Obvious

Here are eight critical yet often overlooked considerations for evaluating potential firms—as well as your own.

When advisors evaluate wealth management firms, there are numerous items they are (rightfully) concerned with above all else. Transition deals, ongoing economics, technology stacks, investment platforms and firm brand names are among the most common.

In fact, with the exception of the transition deal, advisors judge their current firms on these criteria each and every day. So, for the purposes of this article, we are going to consider them table stakes.

How else might an advisor weigh the merits of a particular firm?

Here are eight critical, yet less obvious, considerations:

  1. Client/Book Ownership: There are firms that write into advisor contracts that the advisors own the client books. Some are more vague, while others still explicitly state that the firm owns the end-client relationships. It’s essential to know what recourse you have should you decide to leave the firm someday. Will you be able to take your book with you?
  1. Mutual Interest: Does the firm want you back? Commonly, firms express their level of interest through softer, more subtle means. Are they responsive to your asks? Do they treat you as a VIP during the recruiting process? Are they pricing you aggressively relative to similar-size advisors they have recruited? It’s important to read the tea leaves because often there is a message in a firm’s behavior. Even if a firm is, on paper, a great fit, if it is tepid in its interest toward you, you’re probably better off looking elsewhere.
  1. Succession Planning: It’s no secret that the advisor workforce is aging. Accordingly, succession planning is top of mind for most successful wealth management practices. Does the firm have a built-in retire-in-place or sunset program? Does it offer you the ability to find a successor in-house if you don’t already have one? It’s never too soon to start thinking about these critical topics.
  1. Multiple Affiliation Channels: It is increasingly common for firms to offer additional affiliation channels. Typically, this means a captive W-2 channel and an independent channel. Does the firm allow you to slide between the two down the road if it makes sense for you and your clients? How easy or encouraged is it to do so in practice?
  1. Future Economic Considerations: Beyond the initial transition deal, what other avenues does the firm offer you to monetize? Partnership, equity or a path toward more meaningful economics? Particularly relevant outside of the traditional wirehouse world, many firms use equity or a path toward partnership to incentivize advisors.
  1. Referral and Growth Mechanisms: Not all advisors care about growth—but most do. At some firms, advisors’ grid payments are supplemented or reduced based in part on asset and client growth. Beyond that, growth is the lifeblood of any successful business. And while advisors are always looking for organic growth engines (prospecting, referrals from existing clients, etc.), many firms offer them additional avenues to turbocharge their efforts. Common examples include referrals from the investment bank, CPAs and commercial/retail banks. Also, some firms more actively provide book-buying opportunities to their advisors.
  1. Future Ownership of the Firm: Are they a candidate to be acquired by another brokerage or private equity firm? Or perhaps they might go public via IPO? How would such transactions impact your business? Anytime a firm goes through a liquidity event or transaction, it has the potential to be disruptive to advisor business. On the positive side, perhaps advisors benefit from the transaction, like a retention deal or an equity stake. But on the negative side, such transactions can potentially upset the proverbial apple cart, strain capacity and change the firm's ethos.
  1. Operational Excellence: Does the firm do the little things right? How easy is it to get things done? Are the middle- and back-office support teams adequately staffed and trained? Is management business-friendly and savvy at the local and national levels? These items are hard to quantify, but most advisors can articulate whether the firm is efficient and effective in its day-to-day business. More commonly, advisors can quickly recognize when a firm does not deliver on this point. In extreme cases, advisors might even feel it’s actively working against them due to red tape, bureaucracy and management ineffectiveness.

There are many reasons why an advisor might prefer one firm over another. The above list, combined with the "table stakes" factors, provides a solid framework for evaluating potential firms—as well as your own.


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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