In Registered Rep.'s June 2010 issue, Philip Palaveev penned an article that analyzed the magazine's Annual Top Wealth Manager Survey results on compensation. Based on that data, he argued that “FAs who stay at their firms fared better than those who move.” Palaveev, who is president of Fusion Advisor Network, added further that “the grass-is-greener mentality does not pay off, and in fact, takes away from the [advisor's] practice. Many factors contribute to this result — changing firms results in losses of revenue and clients in the moving process.”

While I don't typically use this column to rebut the ideas of others, I do have to take exception to Mr. Palaveev's conclusions. But first, some caveats. It is true that some of the time an advisor is better off staying tethered to his firm: if the advisor has recently taken over a book of business and needs to solidify relationships with new clients before making any radical changes; if that advisor does not believe that his clients (especially his bigger ones) are loyal to him, and therefore, portable to another firm; or, if the advisor is in tremendous growth mode and does not want to disrupt his momentum.

Of course, if an advisor is not in growth mode, it does not make sense for him to change firms either, because most recruiting packages at the major firms are structured to reward growth. Only a portion is paid upfront. The bulk comes on the back end, as the advisor meets asset and production “bogeys” over five years time.

The truth is, the advisors who will benefit most from a move are those who foresee enough growth to allow them to earn their back end bonuses (i.e. 70 percent of recruited assets at end of year one and 150 percent of recruited assets and production at end of year five), but whose momentum will not be disrupted by a move.

I believe that advisors need to think about a career move when the following criteria are present:

  • The advisor no longer believes that his current firm is the best place to serve his clients and support his expected growth;
  • The advisor believes that either another firm or affiliation model (i.e. independence) will allow him to achieve his personal, professional, client service and life goals better;
  • The advisor believes that making one well-timed move in his career is in his and his family's best financial interest and has determined that now is the right time to do so (based upon current transition packages or the economics associated with independence).

Experience has shown that the most successful moves were those made by individual advisors or teams where all of the above criteria were true. To make a move in a vacuum, where the motivation for the move is due to personal financial gain, and not pay heed to what will be best for clients in the long term can be a devastating mistake. When advisors do not put clients' interests first, they find themselves with a big up-front check, but a much diminished book of business after the move, and the inability to hit back-end bogeys.

Take Roger and Pam, who left their wirehouse to join another in the summer of 2009. They say the move was the best professional decision they ever made. With a book of assets up almost 10 percent and a pipeline of prospective clients growing weekly, they attribute their success to:

  • Deep relationships with clients. The team took the time to explain the benefits of a move to them so that the clients were vested in the team's success;
  • Taking the time (more than eight months) to meet a multitude of firms, from the wirehouses to the regionals to the independents, in order to determine that all of their clients could be served with the same or better level of product and tech support and, most importantly, that a move would actually be an uptick for them;
  • Making a very realistic assessment of where they were in terms of their expected growth, and choosing the firm to go to and the timing of a move based upon support of this growth;
  • Having articulated a “wish list” of things they needed from a new firm and a new manager.

After three months, the team found that 90 percent of the clients they wanted to move with them joined them, and the other 10 percent joined by the end of nine months.

Writer's BIO:

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