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What Really Makes Financial Advisors Happy?

In a world driven by the bottom line, the root of contentment often lies behind less “easily measured” criteria.

For all of the time, energy, effort, and money that firms spend on recruiting advisors, there’s one critical question they often neglect to address: “What makes advisors happy?” Some firms may assume it’s compensation and growth potential. But that’s often not the case.

When I say “happy,” I mean deep down, when you strip away the noise, what really makes an advisor tick?

First, let’s consider the backdrop against which advisors view the world:

All advisors struggle with a fundamental (and important) question: “Am I at the best possible firm for my business and clients now and in the long term?”

Advisors know they have more legitimate choices than ever before. Part of what makes this question so difficult to answer is that in captive firms/models, in particular, management intentions for the future can be obfuscated. Sure, most advisors can live with the status quo. It’s the unknown that’s scary: “What if my firm makes detrimental changes, and as a captive advisor, I have no choice but to accept them or vote with my feet?”

While we can’t predict what the big firms will do, we can tell with pretty good certainty what the C-suites of various firms are thinking because they tell us every day.

Consider the metrics by which firm leaders are judged by shareholders: Profitability and growth potential. The issue is that these are hard to measure and influence in the short term, so firm leaders (from the wirehouses to the independent broker/dealers) often look at a more proximate metric: Net New Assets (often abbreviated NNA or NAA for Net Acquired Assets). In short, it’s a measure of wealth management client dollars that firms are adding, either organically or inorganically through competitive recruiting.

Now put yourself in their shoes. If that was the metric by which your superiors judged you and therefore determined your compensation upon, wouldn’t you do everything in your power to maximize it?

It’s easy to see why firm management has become myopic and hyper-fixated on bringing dollars in the door.

After all, more assets mean more revenues for everyone—advisors included. The managers hit their NNA targets, and the advisors have more dollars to bill on. More productive advisors should be happier advisors, the thinking goes.

But I believe verily that the logic chain is flawed. Growth and productivity are not synonyms for contentment and satisfaction (though they might once have been). Said another way, advisors are demanding more: It’s not enough that firms provide a platform on which to grow and be productive.

What, then, do advisors really care about? Here are five things:

  1. Culture – When advisors talk about the good old days, they are typically referring to culture. Wirehouse brands used to hold tremendous cachet with their advisor force. But increased pressure from compliance, changes in firm ownership, evolving risk appetite, and a laser focus on bottom-line profitability have sapped many large firms of the culture that once was.
  2. Ease of doing business – Does it feel like you are fighting against your firm to get simple business done? Is there red tape that is hindering the advisor and client experience? When spending half of your day fighting internal firm policies, it may be time to consider another option.
  3. Client experience – Advisors demand technology that keeps pace with the competition and allows a seamless client experience. They frown upon pressures from the firm to cross-sell certain products and solutions, and limitations on account or product types. We tend to focus on the advisor experience, but it’s the client experience that matters most at the end of the day.
  4. Entrepreneurial spirit – Are you energized by the work you are doing? Are you building a meaningful legacy for your next generation? As one wirehouse advisor put it: “There I was at [Wirehouse X] making a lot of money, in a routine, going on trips, well-respected, but feeling discontent. The entrepreneurial spirit I once had was dimmed, and I felt like a practice manager as opposed to a business owner.”
  5. Economics – This is not as simple as, “Am I growing and continuing to be productive?” Especially in a bull market, growth and productivity are table stakes. It’s about advisors earning a fair portion of the revenue they generate and feeling like the firm is delivering sufficient value for the portion of the revenue they are keeping. As one advisor at a regional firm put it, “I have no problem with the firm keeping 50 cents on every dollar because they deliver so much value. But as soon as that changes, I won’t hesitate to look elsewhere.”

Since the landscape has expanded so tremendously, advisors are no longer held hostage to a particular firm or model. Even advisors in growth mode who have enjoyed some of the most productive years of their careers are stopping to ask: “Could I serve my clients better elsewhere?”

Yet often, there’s an even bigger question that they’re asking themselves: “Could I be happier and more fulfilled in another firm or model?”

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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