There are many benefits that top financial advisors (producing $1 million or more a year) receive when moving to a new firm. The most obvious is a handsome transition package of 220 percent or more of trailing production (over a 3-year period). But there are other significant and less well-known considerations that firms are making for the biggest and the best.
“Large producers just have more clout when it comes to negotiating deals with new firms,” says Brian Neville, a New York attorney and partner in the firm of Lax & Neville, which specializes in financial-services disputes, primarily in the broker/dealer industry. Neville tells of a recent experience he had with Steve, a $1.3-million producer who was planning a move to a high-profile wirehouse office in New York City. Steve, who had never switched firms before, was offered — and was prepared to accept — a transition deal that would pay him $1.95 million in upfront cash (structured as a forgivable loan), with a total deal worth more than $2.86 million. The sticking point for Steve centered on the 7-year promissory note that he was being asked to sign to secure the forgivable loan. That note called for the balance of the obligation to be owed back to the firm in the event that he was terminated from his employment with the firm either “with or without cause.”
Acting on Steve's behalf, Neville approached firm management and counsel with a proposal for a change in the promissory note's language. After a few rounds of negotiation, the firm agreed to alter the promissory note, requiring repayment only if Steve were terminated “for cause,” and Steve moved to the new wirehouse the following month. “This would have been a difficult sell if he weren't such a large producer,” says Walt, the manager behind Steve's hiring.
Another bargaining opportunity that Neville has been able to take advantage of on behalf of his client advisors who are switching firms is a more attractive payout for a period of time. Neville cautions that an advisor should be sure to get this type of agreement in writing. “Firms are willing to agree to a set period of time, perhaps a year or more, for the big producers,” says Neville. After all, managers have a mandate to fill the seats in their offices with the highest-producing brokers they can find.
Managers of bulge-bracket firms mentioned some other less well-known incentives that are being offered to substantial producers:
Business Coach: Some firms will offer promising recruits a business coach for up to one year to help with marketing and business plans, team strategies, etc.
Sales Assistants: Usually advisors only get their own sales assistants if they generate over $1.2 million annually. But some managers will offer a sales assistant to an advisor who produces less than this figure.
Special Expense Allowance: Some firms will pay for an advisor to make personal visits to individual clients in an effort to ensure that these clients will follow the advisor to the new firm. “I wanted the opportunity to look some of my larger clients in the eye and tell them why I had decided to change firms,” says Jeff, a newly transplanted wirehouse advisor. “The fact that I was being reimbursed for these trips was a big factor in my decision to move where I did.”
Title: What might seem trivial to some means a world of difference to others. Typically, only $1-million producers get the senior vice president title. “However, for the right $900,000 producer (normally eligible only for a first vice president title), we will agree to bump that up to the senior v.p. title,” says one branch manager.
Bloomberg: Each Bloomberg terminal costs approximately $1,500 per month, and in Branch Manager Larry's East Coast office there were only eight Bloomberg terminals for 30 advisors. “However, I recently offered a Bloomberg to a team that I was recruiting, and it was one factor that made them join me,” says Larry.
Given the competition for top talent, it is not surprising that firms are willing to take that extra step to attract some advisors. You have to know what your worth — and ask for it.
Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting www.diamondrecruiter.com