Advisors who are exploring their options will be the first to tell you: The world of recruiting has changed quite a bit in recent years.
Just two years ago, the buzz was all about Morgan Stanley and UBS pulling out of the Protocol, which firms would be next and how it would change an advisor’s ability to move. Ultimately, advisors moved anyway.
Then UBS and Merrill Lynch pulled back on recruiting, while Wells Fargo turned up their efforts with really aggressive deals.
As the big brokerage firms tightened their grips, the independent space was gaining solid momentum, attracting both seasoned veterans as well as younger, longer-term-focused advisors.
And advisor sentiment changed completely, shifting to a greater desire to act as true fiduciaries with a focus on freedom, flexibility and control.
The result of these evolutionary shifts is a level playing field where independent advisors now have access to the same sophisticated products, services and technology as their wirehouse colleagues. Yet, when it comes to recruiting deals, the field has never been more irregular.
For example, we’re seeing top recruiting deals in excess of 300% from the likes of Wells Fargo, First Republic, RBC and J.P. Morgan Securities, while Raymond James and other regional firms are offering deals in the 150% range. Then there’s the independent space, where advisors are looking at deals anywhere from 15% to 70%.
While the economics of a move is certainly an important factor, we’re finding that advisors are focusing more on things like culture, ownership, flexibility, and support for growth and succession. Yet even in today’s world there is no perfect solution—that is, to get the best deal, best payout and best culture all under one roof—making it critical to prioritize what’s most important to solve for.
Wanting It All
Consider a wirehouse advisor I’ll call “Jennifer”—the senior member of a three-person vertical team, one of whom is her 30-year-old son. She’s grown frustrated with changes in the culture at her firm, the inability to market her services freely, and the overwhelming amount of bureaucracy. Jennifer is looking for a new home that will give her more control and the ability to customize the client service model, as well as the opportunity to monetize her business, and to get a payout at or better than the 48% cash comp she has now. She’s looking to solve for all of these things and, perhaps most important, to protect her son, the rest of her team and her legacy.
After four months of smart and thoughtful due diligence led by my team, and the early elimination of three options that just didn’t feel right, Jennifer decided that she was in love with Raymond James. The firm’s culture, payout and philosophy around client ownership were all a “perfect fit”—that is, except for their recruiting package, which was just so much lower than the others. Her response: “I would love to go to Raymond James, but be paid a Wells Fargo deal.”
Unfortunately it just doesn’t work that way.
The reality is that the best in culture and the biggest deals are often mutually exclusive—and even in an expanded landscape with more options than ever before, that perfect world may not exist.
So, what are Jennifer’s options?
- She can opt to stay put because there just isn’t a “better enough” option.
- She can accept that there is no perfection and choose between the culture or the deal.
- She can go independent and build her own firm, forgoing the recruiting deal for the long-term upside.
- She can decide to be more flexible and expand the list of firms she might consider, choosing one that offers more of a middle ground.
Jennifer’s story focuses on getting stuck between culture and deal, an example of a decision-making quandary at play: The opposing forces of conflicting requirements. Even though we’re seeing a shift in advisor movement and mindset, there are still many advisors who get stuck trying to check off every box on their list.
While there’s nothing wrong with wanting it all, this can trap advisors in inertia, waiting for a scenario that may never exist.
For those who are willing to be flexible and accept the reality that there is no perfection, options and opportunity abound. Take a thoughtful and strategic approach to due diligence, identifying those things that are truly most important to you and explore with an open mind: You may find a version of Utopia that more than meets your expectations.
Mindy Diamond is president and CEO of Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.