Now Is the Time to Change Firms

Firms are putting their best offers forward, sometimes picking up termination fees, paying more up front or offering higher payout for six months to offset moving costs.

While broker-dealers report that 2010 has been a slow year for bringing in new advisors, especially after two booming years for recruitment, now may be the time for advisors who are considering making a move to act. Why? First let’s look why 2008 and 2009 were such stellar years for recruitment.

In 2008 and 2009, merger-and-acquisition activity in the broker-dealer community left many advisors unsettled. The sudden ownership of Merrill Lynch by Bank of America, merger of Smith Barney and Morgan Stanley along with others resulted in many advisors changing firms. Subsequently, many of the wirehouse firms began penalizing advisors with less than $400,000 in production with lower payouts, sending this group running to become independent.

In 2007, when LPL Financial purchased the Pacific Life broker-dealers – Mutual Service Corp., Associated Financial Group and Waterstone Financial Group – it initially kept Pershing as the firms’ clearinghouse. A year later when LPL announced it would roll the business into LPL from Pershing, some of the 2,200 representatives no longer felt LPL was their best fit. Consider also the situation of the AIG Advisor Group broker-dealers -- Royal Alliance, FSC Securities Corp and SagePoint Financial – when AIG was bailed out by the Federal Reserve and the firms went up for sale.  These situations resulted in many advisors leaving LPL- and AIG-owned broker-dealers.

Additionally, after the 2008 meltdown, many advisors received pressure from clients to break away from no-longer-trusted larger conglomerates.

With all of this activity behind us, recruiters are faced with a new low-supply environment. Advisors are no longer focusing on changing firms in the midst of instability. Instead, advisors are focused on staying in front of their clients, opting for the stability of the familiar. Yet, we think now is a highly opportunistic time for advisors considering changing firms to make a move. Here are three reasons why:

1.       Beefed-Up, Sophisticated Transition Teams Are Ready for You. In 2008 and 2009 when advisors were moving in record numbers, broker-dealers responded by staffing up transition teams to keep up. With movement slowed, these teams are not as busy. For advisors ready to move, little supply translates to first-class service.

2.       Aggressive Transitioning Packages. Fewer advisors looking to move translates to firms that may be willing to offer more to close your business. Firms are putting their best offers forward, sometimes picking up termination fees, paying more up front or offering higher payout for six months to offset moving costs. 

3.       Happy Clients Follow Their Advisors. With markets up considerably from 2008 lows, taking advantage of the up-tick when you as an advisor are in favor is a wise move. Consider that an announcement that you are changing firms is both an invitation to join you and an opportunity to take business elsewhere. In down markets, clients are more reticent to follow their advisors. Yet in up markets, clients tend to follow.

If you are considering making a move, we advise you act sooner rather than later and take advantage of an opportunistic time.

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