For an advisor, a prospective new firm and a nice up-front check might be the best thing since sliced bread, but if a sizeable portion of the client base doesn’t follow, the move could prove disastrous. So before an advisor’s thought process starts to revolve around nicer office space, greater payout, or the ability to do more business, he or she must first consider things from their clients’ perspective.
- Will the cost to my clients increase if I make a move?
- How will my clients’ service experience be enhanced? Can I comfortably say: “I will be able to serve you better elsewhere?”
- I know that my clients are frustrated here, but how much will it be improved if I move?
- Do many of my clients have non-portable assets or outstanding loans that would cause an issue if I left my firm?
- If I move to a relatively unknown firm or start my own, how would this resonate with my clients?
- How confident am I that a new firm has the infrastructure and experience to make my clients’ move seamless?
When Jeremy, a wirehouse advisor in the Northeast, switched firms six years ago, he was generating $1.1 million in annual revenue on $120 million in assets. Today, he’s making $1.6 million in revenue on $150 million in assets across 220 clients. Just recently, Jeremy reached out to me with the thought of moving again. He knew that the transition deals were larger than they had been when he moved, and he wanted to capitalize on his recent successes. When I asked Jeremy how this move could benefit his clients, his answers were flimsy at best. It was clear that he was only after personal gain.
Despite my counsel to the contrary, Jeremy moved in early December 2014, and things haven’t gone well for him. More than half of Jeremy’s clients decided to remain with his old firm. Jeremy might have received a nice up-front check, but he did not hit all of the back-end bogeys at the new firm, as his book was now a fraction of what it once was.
Take Charles and Henry, two advisors from Chicago who had been at the same firm for their entire 16-year careers. Last summer, they started considering a move. The only interaction they were having with senior management was increasingly adversarial. Also, they were spending less time taking care of clients and prospecting and more time worrying about compliance and paperwork. Some clients were also unhappy that their firm repeatedly bombarded them with solicitations from the bank and, ironically, when their clients needed specialized loans, the advisors were thwarted in their ability to get them done.
After much thought and due diligence, they came to the realization that most of their clients were ambivalent about their firm, viewing Charles and Henry as their trusted advisors, and that they could service their clients better and more efficiently if they moved away from a big firm. Last October, they broke away and started their own wealth management practice, partnering with Focus Financial Partners.
They were hoping the move would save their clients’ money; allow them to serve their clients with greater freedom, flexibility and control; and allow them to act as buy-side advocates for their clients, creating competition for price and service. After three months in business, 98 percent of their clients have transitioned over, and they are already back to pre-deal production numbers.
When considering a move, identifying the impact on your clients could mean the difference between a smooth transition and a disastrous move.