From the May 2006 issue of Boomer Market Advisor • Subscribe!

A marriage made in service

Having narrowed a field of six broker/dealers to one -- ING's Multi-Financial Securities Corp. -- Hatcher began the transition and opened Hatcher Financial Group in Newport Beach, Calif. But as he quickly discovered, change isn't easy -- for himself or his clients.

"The broker/dealer decision was easy," he recalls. "The most difficult part was the changeover with clients. It simply wasn't what I thought it would be."

But in Hatcher's case, the results made the effort, and angst, well worth it. He appreciates the fact that he now largely controls his destiny with his own branded practice. He has access to a broader range of products, a strong support infrastructure and the potential to pass on his practice to his children -- all because he chose a broker/dealer whose culture, priorities and strategies align with his own.

Hatcher is just one of a high number of advisors to recently flee the wirehouse world. Once the search begins for a new broker/dealer, they typically find a buyer's market. Whether their priority is finding the highest payout, the best service model or the best overall value proposition, a high number of flexible affiliation models are now designed to lure top advisors.

But choosing the most suitable broker/dealer isn't simple or straightforward, given the range of factors an advisor must evaluate. Competition among broker/dealers for advisory talent is high. For many advisors, the relationship is about more than money -- and other less quantifiable factors weigh heavily in the decision.

"You have to look at the complete picture," says Andrew Daniels, director of field development at Commonwealth Financial Network in Waltham, Mass. "People choose a company like ours for the environment, the attitude and the service model. Someone who offers 92 to 95 percent payouts -- what does that mean? You may be getting a broker/dealer who's not going to provide you much support. That's fine for advisors who are self-tending; others need more than that."

Hatcher says an advisor should enter the process with a firm idea of what he wants from a broker/dealer. Doing so will provide the framework for performing proper and extensive due diligence necessary to find a compatible long-term partner. Frequently asked questions
Valerie Brown, president of ING Advisors Network, the umbrella organization that includes Denver-based Multi-Financial, says that most often, advisors are attracted to a broker/dealer's ability to make the advisor's practice more efficient, be it technology-based equipment, transition suites, business cards, stationary or brand tie-ins. If you can simply make it easier for them to do business, she says, then they're interested.

Here are important questions for the advisor to consider during the fact-finding and decision-making process:

  • What's best for my client? Hatcher says his top priority was to find "a [broker/dealer] that would make it easiest to integrate my clients into a new environment. It wasn't about me."
  • Do I want to afflilate with a high-profile or low-profile broker/dealer? Brown explains that advisors generally fall into one of two categories: those who want the backing of an established team and a recognizable brand; and the entrepreneurial type who wishes to create his own brand that isn't overshadowed by the broker/dealer.
  • How important is product flexibility? Wirehouse advisors often are limited in the products they're able to offer clients. Therefore, advisors who want the autonomy to offer best-in-class products opt out of the captive model. "Clients are increasingly demanding more choice," Hatcher says. "My first requirment was to find a place where the choice of products was virtually unlimited."
  • Which model am I best suited for -- one that puts the highest value on payout or one that emphasizes service and added value? Compensation in the mid- to high 90-percentage range is nice, but you might have to sacrifice other aspects of the relationship. Daniels concedes that his company doesn't offer the highest payouts. Instead, it offers a model that stresses the advisor's time with clients.
  • What type of payout grid does the broker/dealer employ? Some are simple; others are highly stratified, complex and confusing. According to Daniels, the less convoluted, the better.
  • How will the broker/dealer support me during the transition? Given the complexities of transitioning to a new broker/dealer, at both the client and back-office levels, Hatcher says it's crucial to align with one that offers strong transitional support. Multi-Financial sent a team of six people to his office to expedite the changeover.
  • How financially solid is the broker/dealer? ING's Brown says there's no downplaying the importance of aligning with a stable company. Beware of companies that are shrouded in secrecy due to legal/compliance issues or corporate restructuring.
  • How much do I value technology in my practice? Advanced technology is something that lured Hatcher to Multi-Financial. Advisors who are less tech-savvy may care little about access to advanced software and Internet-based back-office features.
  • Am I truly a financial planner or more of a producer? Some broker/dealers cater to transaction-oriented agents and advisors. Others use an affiliation model better suited to a comprehensive financial planning approach.
  • Is serving the advisor the company's core business? One of the main reasons Hatcher sought independence was the lack of emphasis his former employer placed on its advisory business. If the advisory segment is a non-core element, a company will give it second-class treatment.
  • How much do they want me personally? In the financial services business, relationships are as important as numbers. As a captive advisor in a huge organization, Hatcher says he grew tired of the impersonal environment. "I wanted to be someplace where I was more than a number."

One of the thingss that caught his attention during the decision-making process was a personal visit from the Multi-Financial CEO. Such an emphasis on relationships, he says, tends to flow from the top down, from the executive suite to the client level.

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