From the April 2009 issue of Research Magazine • Subscribe!

April 1, 2009

The Deal

Over the years, The Deal has always been a favorite topic among Americans. In the '60s and '70s, we were captivated by Monty Hall's "Let's Make a Deal" television program. In the '80s, Donald Trump, his lovely haircut, and his book, "The Art of the Deal," entranced us. Today, our love fest continues with the obsessively clean Howie Mandel's "Deal or No Deal." Sure enough, financial advisors also have their share of infatuation with The Deal.

Way back in the good old days of the bull market, I would often hear advisors talking about The Deal they were currently working on. Perhaps they were working with a rich business owner with excess cash to invest. Maybe it was a soon-to-be retiree with a huge rollover IRA. Whatever it was, The Deal was a good thing, and it always meant more money. Today, they are still talking about The Deal, only now it's about what kind of deal they'll get if they move to another broker-dealer.

As competition among quality financial advisors grew over the years, so did the competition among firms who wanted those brokers. To avoid making a bribe sound like a bribe, broker-dealers called their deals transition packages. What better way for an advisor to choose a new home than by evaluating how much money he or she is being offered? After all, it seems to work for Alex Rodriguez and Manny Ramirez.

This system worked great if your BD was like the New York Yankees, but if it was more like the Kansas City Royals, good luck. Some very good small to midsize BDs continually lost out to the big boys even though they might have been a much better home for the coveted financial advisor. This model worked nicely for the advisor as well -- as long as the market continued to stampede upward. But when the Bull morphed into a Bear, the model began to shake like a 1972 Ford Pinto that was missing a few lug nuts.

Many financial advisors who took the money learned that The Deal had a few strings attached. Silly strings like, you had to continue to produce like you had been producing. Again, easy in an up market; in a down market . . . well, you know what the last six months have been like. As the fine print became magnified, advisors learned that if they didn't meet the production requirements, they might have to (gasp!) pay back some of The Deal.

During the latter half of 2008, we witnessed the financial services market being turned upside down. Household names have disappeared into thin air. Others are on the brink of extinction. The deals are starting to fade away as well. If you had an offer a year or even six months ago, odds are that deal is no longer on the table. The shelf life of financial offers these days is about the same as on Deal or No Deal: one commercial break.

So where does all this leave us? If you can't judge a broker-dealer by its transition package (i.e., cash), how does one decide where to hang his or her sombrero? As horrible as it may sound, you'll probably have to go old school and do some research. Talk to recruiters, talk to other advisors, talk to wholesalers. Find out which firms fit your particular style and your mix of business. I've often heard it said that joining a broker-dealer is much like getting married -- and those of you who have been married know you only want to go through it two or three times in your life, tops.

If you are considering making a move, take your time. Compare the firms you're considering by their merits -- not their wallets. It may surprise you if the firm you end up joining isn't the one offering a fancy Chrysler Cordoba with Corinthian leather. But it just may be the one you'll live with happily ever after.

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Once a mildly amusing comedian, Bill Miller now works as a recruiter for a top independent broker-dealer; reach him at writingbill@mac.com.

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