When a securities firm is in the process of merging with another, the knee-jerk response of many reps is to scramble for the exit. Strangely enough, this hasty reaction often is a smart one.
No matter how smoothly they are handled by the involved firms, mergers inevitably upset reps' usual mode of business. Changes in management structure, alterations to compensation grids and shifting benefits and retirement packages add up to a big adjustment for advisors.
Indeed, the amount of upheaval a rep endures during a merger is often comparable to that involved in jumping to a new firm. But there is a major difference between staying and going: Those who leave a merging firm are much more likely to get a bump in compensation than those who choose to stay.
The following checklist is meant to be used in evaluating a current (merging) firm against competitive opportunities.
- Management Changes
Will there be local, regional and district changes as a result of the merger, and how will they impact your daily life? Is your current manager doing everything he can to help you grow your book? Certain brokerage firms, at their own expense, will sponsor local area marketing plans, allow you to hire a junior broker to help you market your services and provide hands-on assistance in marketing to potential high-net-worth clients.
- Compensation and Benefits
Compensation, including deferred-compensation structures and grid payouts, almost always change when a firm is merged or acquired. Check out the new rules and regulations by comparing them to the rest of the industry. Pay close attention to the realities of the retention bonus being offered. The most lucrative are given, unsurprisingly, to the best brokers, typically those with over $400,000 in trailing 12-month production. The bonus is usually not more than 20 percent of a broker's production (versus the transition packages from competitive firms that may offer in excess of 100 percent of production).
- Territory Changes
Will you be asked to share or give up part of your territory when your firm is acquired by a competitor? During a merger, your territory may be reduced or changed, or the firm may add an additional rep to work your territory, creating in-house competition for clients.
- Support Staff
How will the merger or acquisition of your current firm impact your staff? If you are a top producer and feel you deserve more support, checking out the competition is important. You may be able to negotiate for a dedicated assistant as part of your transition package.
- Job Security and Productivity Expectations
How does your production compare to the average production of the brokers of your acquiring firm? Changes in management of your firm mean that the new management may impose increased productivity expectations. If you are on the low end of production (no matter your length of service) your job could be on the line. Keep in mind that regional, boutique or independent brokerage firms welcome $200,000 producers and are eager to help you grow your book of business.
- Transition to Fee-Based Business
Your current management may have ignored the fact that your business style has been primarily transactional. New, merger-imposed managers may feel differently and push you to become more fee-based, resulting in a loss of income. If you are forced to make the transition from transactional to fee-based, you can use a transition package offered by a different firm to create the financial cushion you need.
Clearly, when a merger or acquisition is on the horizon, it is the time to make a serious comparison between your current firm and the new one. The options available at a new firm just might make changing firms worth the effort. Taking meetings with managers at other firms, without commitment and in the strictest of confidence, is a logical part of the due diligence you owe yourself when your current firm is merged or acquired.
Writer's BIO: Mindy Diamond
founded Chester, N.J.-based Diamond consultants, which specializes in retail brokerage and banking recruiting (www.diamondrecruiter.com).