The most stressful time for an advisor who’s thinking about leaving their firm is the time “in between”—that is, the time between deciding it’s time to go and actually making the leap.
What questions should an advisor ask of the prospective new firm(s)?
What are the things a responsible steward of clients should be concerned about?
And, if faced with multiple offers, how does an advisor ultimately choose the right home?
Understanding what you need to know about a prospective firm before you start the decision-making process is key. It helps you come to a decision while in a calm state, rather than under pressure.
Here is a 10-point list that will keep you focused on the right information:
1. Name Brand
What will resonate most with your clients, prospects and centers of influence? Has the brand been tarnished at all? The proliferation of news headlines and social media makes it impossible for any firm to remain completely unscathed. But is the message that resonates when clients hear the firm’s name a positive one?
2. Capabilities
Do you do any type of niche business or specialized work for clients that might not be supported elsewhere? Can the prospective firm fully support your business? And in-depth platform review is critical; make sure that every aspect of your business is vetted—loan rates, private equity lock-ups, credit card capabilities, international capabilities, special arrangements regarding client fees and any other one-off agreements you might have in place.
3. Local and Regional Management
They are the faces of the firm, your champions and advocates, and your blockers and tacklers. How well-connected are they? What is their background? Do they see the world as you do? How well-respected are they by the advisors who work for them and by senior leadership?
4. Senior Leadership
Senior leaders drive the direction and goals of the firm. Have they clearly communicated their mission and vision? From what source does the firm generate most of its revenue? Where will they invest the most? Will your niche business continue to be a strategic priority for them?
5. Transition Deal and Ongoing Payout
With all of the changes brought about by the Department of Labor’s fiduciary rule, this is a moving target. How much of the overall deal is guaranteed? Will the firm reimburse all of your unvested deferred comp? Will it be replaced in cash or with a cliff vest? If a firm is willing to pay back-end bonuses based upon revenue and asset growth, can you negotiate any portion of the deal? That is, can you get paid more in the early years so that you will have the ability to earn the greatest percentage of bonus money when you are likely to generate the greatest amount of revenue? What will your payout be at this firm? What has been the firm’s history in changing advisor comp?
6. Support Staff/Expenses
How would this move impact your staff? Will your support staff be given a raise? Will you have to contribute to your staff comp? Will you be able to hire additional support as part of this move? Will the firm offer you marketing, travel and entertainment expense money, especially for the first year after the move? Will the firm reimburse you for attorney’s fees?
7. Growth
How will this firm help you grow faster and more efficiently? What will they do to invest in you? Understanding their vision and goals are key here as well, as it ties directly to their support of growth.
8. Succession Planning
What kind of plan does the firm have in place for retiring advisors? How does that plan compare to your current firm and others? What sort of flexibility will the plan allow you in terms of how to choose your successor and how much you want to work when the time comes for you to exit the business? This is especially important if your timeline to exit is part of a short-term strategy.
9. References
Be sure to insist on talking with other advisors that work for the firm and have similar businesses—that is, similar business mix, production level, asset base and/or came from your old firm. You’ll want to hear about their experiences on the above eight points.
10. Instincts
Lastly, go with your gut. Typically, after you have vetted all of the above, you will come to a point where you realize that it’s a jump ball between one or two firms. Absent a huge delta in transition economics or the ability to support your business, the final decision will come down to what feels the most right.
The decision to stay or go is a big one. No one should ever change firms unless it improves your ability to serve clients, to be paid a fairer wage, to accelerate and foster a better business life. Often there is leverage in being recruited that an advisor lacks when they have been a long-term employee and taken somewhat for granted. It doesn’t have to be that way. Keeping these 10 points in mind, asking the right questions and paying attention to the answers is key to ensuring the next step is the right one.
