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A Process for Advisors Considering Change

Balancing the needs of all stakeholders offers a clearer and more congruent path toward your ultimate destination.

All journeys begin with a direction.

And whether you’re driving in your car, taking a walk, or even going for a hike, having some preconceived notion around where you’re headed helps to ensure the desired destination is ultimately reached without getting lost along the way.

Likewise, it is the concept of “direction” that serves as the basis for a strategic decision-making process.

For advisors who are considering a move and evaluating options, we define this direction as their “True North.” That is, the most important items which, if solved for, would clinch a decision—and guide them toward a destination in congruence with their goals.

Optionality Increases the Potential for Confusion

Much like any journey, the more choice you have, the greater the potential for getting stuck or lost in the process. By identifying your True North, you are able to eliminate the options that are less aligned with your goals, making the due diligence process more efficient.

We share a process with advisors that guides them toward their True North by helping them to calibrate their “inward and outward pointing compass.” That means identifying the “inward” factors or personal motivators that drive a move, and “outward” such as external motivators or those impacting clients or team—and balancing these often-competing poles.  

For example, “Phil” was a career wirehouse advisor managing $350 million for his high net worth clients. While he was loyal to his firm for over 25 years, he started to feel like the firm may no longer be the best partner for what he anticipates will be the final decade of his career.

So, Phil decided to take inventory of his frustrations to better understand if his pain had reached a threshold where it made sense to even consider leaving. Although he was increasingly unhappy with the direction of his firm, he realized that many of his stated frustrations (compensation plan changes, lack of client ownership, marketing inflexibility and stalled growth due to firm restrictions, for example) were “inward pointing” items.

Since Phil viewed his team members as an extension of his family and always strived to do what was in his clients’ best interests, it wouldn’t be good enough for him to justify the hard work and disruption of a transition simply for his own benefit. Through conversations with his key administrative partner and two top clients, however, Phil quickly realized there were “outward pointing” challenges, such as pressures to open checking accounts and intense bureaucracy that took time away from serving clients, plus a few instances where the bank was inflexible in underwriting loans.

Even though a recruitment deal and competitive payout were high on his internal priority list, this need had to be weighed against selecting a firm that offered considerably more flexibility to serve clients without limitation.

Once he was able to align inward and outward pointing factors that impacted all stakeholders – Phil, his team, and his clients – it became clear that they were indeed challenged by the status quo. With clearer direction, he was able to jump into action to find a firm or model that appropriately balanced his own needs and those of his team and clients.

Finding Equilibrium

Through counseling advisors over the years, we’ve found the following inward and outward factors tend to headline an advisor’s wish list when they embark upon the exploration process. Coincidentally, deficiencies in these areas tend to be an advisor’s key pain points and top reasons they consider change.

For Phil and advisors like him, identifying the factors that will positively drive change means taking a step back and gaining a full understanding of how each impacts the key stakeholders, then balancing the pros and cons.

For example, the key “compass” indicators that advisors identify include:

Inward Pointing Compass:

  • Competitive recruitment deals
  • Retire-in-place/sunset programs
  • Strong payouts and consistent compensation plan
  • Building enterprise value
  • Brand reputation of firm
  • Local office environment
  • Platform and culture that fosters growth
  • Marketing flexibility
  • Efficient and cutting-edge advisor facing technology
  • Business-friendly compliance policies

Outward Pointing Compass:

  • More robust and open-architecture investment platform
  • Expanded service offerings for clients (e.g., advanced planning, family office services, stock plan administration, tax and estate planning)
  • Wider array of banking and lending solutions
  • Better resources and support
  • Stability, scale, and overall vision of the firm
  • Compliance that can be customized to a client’s needs
  • Eliminating or limiting conflicts of interest
  • Moving away from a product-focused culture and towards one that is advice-driven
  • Client facing technology
  • Deep bench of qualified next generation inheritors

Before jumping into due diligence mode and meeting with firms, advisors should first be crystal clear on their current frustrations, business goals and list of priorities—essentially balancing both “poles” to identify those which serve as their “True North” and indicating a move should be considered.

This process serves as the basis for a thoughtful and strategic approach, which will result in an advisor’s personal motivations and the needs of his clients being readily accomplished by each firm he considers.

Louis Diamond is executive vice president and senior consultant at Diamond Consultants, a recruiting and consulting firm for financial advisors and independent wealth management firms.

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