From the December 2008 issue of Research Magazine • Subscribe!

Time for Action!

For years, the U.S. economy was like the 2007 New England Patriots: undefeated, untarnished. How the mighty have fallen.

It's time now for financial advisors to review their own game plans, both to buttress relationships with clients and to address franchise weaknesses.

The good news is that you are likely the most blessed group of people on Wall Street. For top-quintile advisors seeking new firms, packages can exceed 200 percent. Even as Wall Street slashes staff, solid producers are always in demand. The bad news is that you are on the frontlines of a market crisis pummeling retail and institutional investors alike.

You need to prove your worth to clients. Grab a helmet! There's a lot you can do to restore investors' faith in your role as a trusted advisor and to ensure that you have the flexibility to take your business in new directions.

Solid client relationships are the key to your franchise. To be sure they recognize your value:

1. Reach out to investors now.

They need your advice more than ever. Pick up the phone and send personal notes to clients explaining clearly what you are doing to protect their investments. Arrange meetings that enable you to articulate your short- and long-term plans.

2. Prospect. Investors are upset.

You are probably spending many extra hours soothing your own clients. Nonetheless, times of turmoil make for ideal opportunities for winning new clients. If you can, make time to prospect.

3. Expand your franchise: Many of your colleagues will want out just ahead of the boomer retirement bump.

Demographics point to two favorable trends. First, advisors are aging (about half are more than 50 years old), and Wall Street is not recruiting enough younger people into the game.

In tough times, many advisors are more likely to choose early retirement. Many with weak franchises will leave the industry and their book of clients to the fleet of foot. Fewer people will be chasing more assets.

Once you have opened the lines of communication with clients, you need to assess your business environment: Are you at the right firm? Do you have the right mix of clients, products, and platforms? What do you need to do to shore up your franchise and improve on it?

Your firm's stock is down as well. But steady producers can count on more job security than anyone else on Wall Street.

Opportunities are expanding; the elite can still command top dollar.

New boutiques and independent firms are providing alternatives to wirehouse firms. Some new players are wooing $2 million-plus teams with recruiting packages that rival the cash and stock deals offered by major firms.

Wall Street MVPs are commanding packages in excess of 200 percent from established wirehouse players. That would include advisors with at least $1 million in commissions and $100 million in assets, or teams with $2 million in commissions and $200 million in assets.

But the contracts are longer than ever -- nine years, up from seven years in March. (Contracts were four years in the mid-1980s.)

Show-me attitude will make switches tougher.

Branch managers will focus on how you fared in the last three months - not just the last 12 months. Firms are leery about paying for damaged goods. They will be conducting extensive due diligence to ensure that your asset base is transportable.

Recruiting is becoming more selective.

Brokerages are no longer awash in cash. Commercial banks are the new employers. And commercial banks use less leverage which is both safer and less profitable. That means those firms will be using their recruiting dollars much more strategically - spending generously on top quintile producers and less so for middle-of-the-pack advisors.

The structure of American finance may be forever changed by the sub-prime mortgage crisis. But the needs of individual investors have not.

Financial advisors will remain a mainstay. I observed that as the debacle unfolded over the past two years, financial advisors began thinking differently about Wall Street, even before major firms cratered.

Instead of asking me about what firms were "hot," they began assessing firms in terms of damage control skills. They asked: "What firms are least damaged?" "Where would my business be safest?"

Advisors understand that ultimately the safety of their franchises depends not on where they are but on the quality of their relationships with clients. In a volatile world, that's the only part you can manage.

If those relationships are solid, financial advisors will be able to attend to larger questions about what to call home base.

As we bid adieu to the old "undefeated" Wall Street, new players are filling the void. In these difficult times, we are all blessed to be in an area where individuals and institutions need advice from trusted advisors.

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Mark Elzweig is president of New York-based Mark Elzweig Company, an executive search consultancy that relies on cutting-edge technology to aid clients. He has worked with financial advisors and investment managers for more than two decades.

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