One-Off Deals

One-Off Deals

Career Moves

Sometimes financial advisors leave their firms over a series of minor events that accumulate over time. Firms might benefit from making little moves that keep their best producers happy and eliminate such headaches.

Take the case of Simon, a New Jersey wirehouse advisor who was generating $1.8 million in fees on nearly $400 million in client assets. With the same firm for his entire 10-year career, he considered himself to be a loyal soldier and a hard worker with a clean business and a good relationship with his manager. Like many of his colleagues, he had growing frustrations with the firm for a multitude of reasons, but was still mostly comfortable in his environment and convinced that changing firms would disrupt his growth and momentum. One day Simon approached his manager with a seemingly minor request for a lateral filing cabinet. The manager politely denied his request, saying that the firm was in cost-cutting mode and the purchase of additional office supplies would put the office over budget. Simon was furious. He wondered how, at his level, he was unable to procure something so simple that would help him to better organize his business. The encounter — in addition to his day-to-day frustrations with his firm, including decreased stock value, and leadership and cultural changes — drove him to consider leaving.

After all, he was acutely aware of the mega-millions the firm was spending to lure advisors from competing firms — advisors who were unknown entities, and in many cases, producing less than half of what he was.

There are plenty of “Simons” sitting in big firms today who have minor frustrations or requests that could be accommodated at relatively little expense to their firms. In many cases, these advisors would be happy if their firm offered to reimburse them for costs associated with hosting a special event for clients, for example, or provide an additional assistant or increase their T&E budget. While big firms pay retention dollars to this group after a merger or acquisition, they often overlook other ways to meet their needs. More than any, these long-tenured, reliable, productive, and profitable advisors are the very ones whom firms should endeavor to keep happy and in their seats. While all advisors know that transition incentive packages far exceed retention packages that are paid to keep top advisors from leaving, for many, staying put is the first choice. How many top advisors who have left their firms, would have actually stayed had they just been given a few other relatively inexpensive perks? It defies logic to think that firms pay more to attract “unknown” talent than they pay to keep the proven talent they have.

Some forward-thinking firms allow their senior leadership and regional managers the leeway to think creatively when their top advisors come to them with simple requests like those mentioned above. They recognize that it would cost them far less, and gain them far more, to simply invest in these folks, than it would to attract advisors from different firms. Still, while retaining good advisors does not take the place of recruiting top talent, the firm certainly has added value when it can do both.

Consider “David,” a top producer at a boutique firm. While David's first choice is to remain with his firm, he is being aggressively pursued by a larger firm where he has the opportunity to monetize his business and replace some lost wealth from his firm's stock decline over the past several years. While David is very impressed with the transition package being offered, he knows it would impact his business and his life to make the move, and he is not all that unhappy where he is. Beyond that, David has a significant amount of unvested deferred comp that he does not want to leave on the table. He knew that it was worth a shot to talk the situation over with his manager to see if they could come to an agreement so that he could feel better about working with the firm.

While the outcome of that meeting is not yet clear, we know other “one-off” arrangements that have been successfully negotiated. Depending on the advisor, firm, and situation, we have heard of packages being offered between 25 and 75 percent of the advisor's trailing 12 months production, usually paid in stock and cash deferred over time. These arrangements are few and far between and are not a replacement for a firm's recruiting efforts, but certainly provide added value for a firm that now can keep and recruit top advisors.


Mindy Diamond is president of Diamond Consultants of Chester, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.

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