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Caught in the Middle

Caught in the Middle

If you got a retention package after a recent bank merger, you may want to stay put so you can take advantage of it. But make sure your clients are happy before you spend that money.

Following the giant mergers that rocked the industry in the market meltdown of 2008, many wirehouse advisors were lucky enough to get fat retention packages. But for some, that's turned out to be a mixed blessing. These retention packages, loans which are forgiveable over periods of 7 to 10 years, make it less appealing for an advisor to leave in the interim. But some of these advisors are unhappy with the way the mergers have turned out, and feel they and their clients would be happier at another firm. Here are a few reasons why:

  1. Accounts are too small — Many firms have established mandates that advisors will no longer get paid on client households with under $100,000 in investable assets. These smaller clients are often shifted to the firms' call centers. But there are plenty of other traditional and independent firms that do not dictate such account service minimums, leaving advisors free to determine which clients they want to keep.

  2. Limitation of products — While the wirehouse firms claim to offer “open architecture,” some advisors find they do not have access to certain lending vehicles or alternative investments. This is either because these are not available in their firm's inventory, or because getting approval through the compliance department is next to impossible. At independent firms, product limitations are almost non-existent.

  3. Large number of HNW clients — As an advisor moves “upstream” and begins to work with an increasing number of high net worth clients and households, he may find that a large bank cannot offer the high-touch service they need. Sometimes boutique or multi-family office firms are better at providing personalized “white glove” service.

  4. Negative Press — Constant negative headlines about firms like UBS or Goldman Sachs have hampered some advisor-client relationships, and made it more difficult for advisors at these firms to prospect for new clients. One wirehouse broker who left to go to an independent firm said it was the repeated questions and concerns over “safety and stability that caused me to pull the trigger and leave despite the large retention package I was paid.”

Hard conversations

Sometimes you just need to talk to your clients about what they want. In fact, FAs should always be informally surveying clients and taking their temperatures to see how they are feeling about the relationship, the advisor's performance and the firm itself. Some pointed questions advisors may want to ask their clients include:

  1. Do you feel satisfied with the service I am providing?
  2. Am I asking you all the right questions concerning your goals and expectations?
  3. Is there anything that I am not doing now that you believe I should be doing?
  4. Do you feel comfortable with how my firm is currently positioned?
  5. Do you have any concerns or questions about me or my firm?

Advisors who get too comfortable and do not make time to regularly take the pulse of their clients will quickly find themselves with fewer clients and reduced production.

Take New York Merrill Lynch advisory team Matt and Carl, who had been at the firm for 8 years. Together they generated $2.6 million in annual production on approximately $290 million under management. Last year they received one of the higher retention deals that Merrill paid out (100 percent of their production). They were very satisfied with the bonus and expected to stick around, but they didn't ask their clients how they felt about the Bank of America takeover. Apparently, several of their biggest clients weren't too happy about it — they left. Matt and Carl have since begun asking their clients how they feel about the service they are getting, and to their chagrin, they have realized that many of their clients are dissatisfied. Rather than risk further client disaffection, they have made the decision to give back the remaining balance of their retention money and tuck into an existing RIA that custodies with Pershing.

Put your clients' interests first and you will keep them happy, and on board.

Writer's BIO:

Mindy Diamond
is president of Diamond Consultants, of Chester, N.J., which specializes in retail brokerage and banking recruiting.

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