Despite all that has been reported about financial advisors jumping from firm to firm, there is still a hard-core group of those who have remained at the same wirehouse or independent firm for their entire careers; some for 20 to 30 years or longer. Many of these long-term advisors have barely even pondered the possibility of changing firms or their independent affiliations. Why not?
Inertia: Staying put offers the path of least resistance, and many advisors prefer to endure whatever challenges they are faced with and save themselves the hassle of moving.
Loyalty: An admirable trait to have. Unfortunately, for many advisors, their loyalty is not recognized or rewarded. In these uncertain times, many firms have stopped looking at the advisor as an individual or a valued employee, and instead see him as a “trailing 12” production number.
Drinking the Kool-Aid: A lot of the Kool-Aid has evaporated over the last few years. There was a time when brokers who worked for some of the larger firms would never entertain the thought that their firms could do wrong. The most striking example of this was Merrill Lynch. But fast forward to September 2008 when Bank of America announced that it was purchasing the venerable firm. This was a wake-up call to many advisors.
Fear of Losing Clients: Each advisor must look at his client base and determine whether his clients are more loyal to him or to his firm.
Too much deferred compensation: Most long-tenured traditional firm advisors are heavily loaded up on unvested deferred compensation. But with the drop in financial stocks, what is the deferred comp really worth?
The initial conversations that we are having with these advisors are frequently of an educational nature. Some of the things that we speak to them about are the changed landscape of the industry, what other firms could offer them in terms of support and platform, and how they might grow faster elsewhere. Any decision to stay or go should be based upon weighing the pros and cons of all alternatives.
Several months ago, I spoke with Jonathan, an LPL rep in the South who had been with the firm for 22 years. He was producing approximately $900,000 in annual revenue on almost $200 million in assets under management. After a bit of probing, I learned that he felt like “an island” where he was, getting little or no support from his firm. But he didn't believe it could be different anywhere else. After several more conversations and meetings that Jonathan had with various firms (other independents, RIA custodians and even a wirehouse), he realized that there was a world of practice support available to him that he had never dreamed about. He has decided to establish his own RIA (as his business was almost 80 percent fee-based anyway and he loved the idea of getting away from FINRA oversight) and set up dual custodial relationships with Pershing and Fidelity.
Michael and Everitt were the senior members of a huge New England Merrill Lynch wirehouse team that had almost $2 billion in assets under management and catered to ultra-high-net-worth clients and corporate retirement plans. After 25 years with the same firm they naturally had a lot of non-vested deferred compensation and were only two years into the forgiveness of a retention package; both of these things were powerful magnets to keep them at the firm. Almost 2 years ago when the wheels were falling off the bus at Merrill, the team went out and did some exploration on their own and came away with the notion that independence was not for them and that all of the wirehouses seemed to be created equal. Today, they often wonder if remaining with Merrill long term is right for them and their clients, as things are not perfect.
When I spoke with the two partners, I had them quantify and weigh the pros and cons of staying versus going. I advised them that only if the benefits of the move could be accretive and compelling enough would it make sense to go. Given this, the team was quick to say the pain was just not great enough at this time to justify a move. They have decided to stay where they are, at least until the retention deal they received is completely forgiven.
Keeping a watchful eye on what opportunities abound in the industry is always a good practice. Be sure to know what you do and don't like about your current job and what else is on offer elsewhere.
is president of Diamond Consultants, of Chester, N.J., which specializes in retail brokerage and banking recruiting.