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Taking Your Practice to the Next Level and Firm

You might have to move to another brokerage house or go independent to offer your better clients the kind of treatment tehy want and can afford ... but aren't getting

The major brokerage firms generally require that clients have at least $10 million in assets before they'll let advisors offer them “white glove” treatment. Increasingly, though, advisors with clients who have as little as $1 million are questioning that standard.

They want to take a more consultative fee-based approach to working with midlevel-net-worth clients and to offer them the same products and services that the very wealthy routinely receive. They think these clients can pay their way and they're considering going elsewhere to prove their point — and enrich their practice.

Where can they go? There may be places that are off limits, like Goldman Sachs and Bessemer Trust, firms that are not likely to lower the bar below the $10 million level. But there are still plenty of possibilities.

They may join a boutique firm, or even move to another large firm — if they can find one that will want them badly enough to cut a deal. It helps to have some bargaining chips, like $1 million in production, a minimum of $100 million in assets under management and a fairly exclusive client list — say, 100 clients or less.

A third alternative is to go independent. The old perception was that only the industry's underperformers went out on their own. This is no longer the case. In June, Barron's reported that 12 of the “Top 100 Women Advisors” were running independent practices. Going independent may provide the cache needed to attract wealthier clients and the chance to tailor products and services to a client's wishes. Independent advisors get to make their own rules about the minimum level of assets to require of clients, and can choose to handle smaller clients they believe have the potential for growth.

Some have been doing this for some time, while others are preparing to, or are thinking about it. Here are a few individual cases:

The Independent Life

A year ago, William, who worked at a wirehouse and managed $170 million, left his job to open his own firm as an affiliate of Raymond James Financial Services. He chose a name that included the words “wealth management” in it because he was able to offer his wealthiest clients the alternative investments and other products and services that he couldn't offer through his old firm.

He was also able to drop those clients who had less than $1 million in assets. Even with fewer clients, he is managing more money, because his remaining clients have turned over more assets to him.

Moving to a New Wirehouse

Janice, the senior producer on a four-person wirehouse team in Arizona is moving to UBS. She has what the firm wants: Her team's $3.5 million in production comes from 300 households that have $750 million in assets. Her average client has between $2.5 million and $5 million in assets. Some have nearly $30 million.

She will get more money, a brand name as good as the one she's giving up and UBS will let her organize her own high-net-worth office for her clients — separate from the firm's wealth-management unit that serves the $10 million-plus crowd. Yet, her clients will still get all that the wirehouse has to offer. That means the $2 million client gets the same services as the $20 million client. She will, however, no longer personally work with all her clients, only those on the high end. The other members of her team will serve the low-end of the book.

Betting on Boutiques

Daniel, who works for a regional firm in New York, which he thinks is a wirehouse takeover target, is looking at boutique firms. He has $1 million in production and $100 million in assets under management, with 60 percent of it fee based. Daniel is in talks with several small-end shops.

They would allow him to offer family-office concierge services for clients with assets between $1 million and $10 million without the bureaucracy he feels comes with working at any major wirehouse that may acquire his firm. Much like William, he sees the move as a chance to concentrate on the part of his book — 70 percent — that falls between $1 million and $10 million, using the time he frees up to hunt for bigger catch.

Finding a new fishing hole can be rewarding. You never know what you might land until you drop your line and try.

Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting

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