Advisors More Likely to Switch Firms With Family’s Approval

Fidelity notes behind-the-scenes resistance in cases where advisors stay put; recruiter confirms advisors don’t invite family input till late stages

Memo to recruiters: A focus on the financial advantages of switching firms may ultimately be less effective than demonstrating how a move might improve the advisor’s work-life balance.

That is because, behind the scenes, family members play a significant role in an advisor’s decision on whether to break away from his current firm, according to a new report from Fidelity Investments.

In front of the scenes, advisors aren’t much talking about their families in conversations with executive search consultants, says Mark Elzweig, a veteran recruiter with New York-based Mark Elzweig Co. That usually comes later in the process, when the advisor has made the decision to move.

Mark Elzweig“Advisors want their spouse to be on board with the extra work and potential stress of a move,” Elzweig (right) says. “Sometimes they'll want their spouse to meet the prospective branch manager and provide a valued second opinion on his character and on the firm itself.”

Released Thursday, the Fidelity Insights on Independence Study marks the Boston-based firm’s second annual analysis on the motivations of those who move, consider a move or remain entrenched in their current firm.

The survey of 783 advisors, none of whom was aware that Fidelity sponsored the study, found that family members were encouraging in 40% of cases where an advisor ultimately moved. Yet in the case of “fence-sitters”—those advisors who considered a move but did not make it—only 8% of family members supported the idea of a switch.

Conversely, the study found little family resistance—just 4%—among movers, but significant discouragement—23%—in fence-sitting cases.

The Fidelity study, whose participants managed at least $10 million in assets, had encouraging news for advisors considering a switch. Overall, advisors who did so saw a 22% increase in compensation over 2008 levels.

While that was moderately above the 17% increase in advisors who stayed put, the raise in pay was 38% for advisors adopting an independent model.

Most of those making the move—89%— ended up happy they did so, with 77% saying they ended up better off financially.

While just 79% of clients made the move with the advisors, the study found the advisors increased their “share of wallet” with 54% of the clients making the switch.

That last finding may have particular significance in the breakaway decision, since the study found that clients not coming along was the second most cited reason (after “current situation is good/grass not always greener”) for staying put.

Elzweig agreed that the advisor’s estimation of client mobility is key to his own willingness to move.

“Only those advisors who are confident that they can bring their clients to the new firm will seriously entertain a move.  That's why advisors who move, in our experience, typically bring 80% or more of desired accounts and assets,” he said.

“It's easier to hit the bid in bull markets when the client's recent experiences with the advisor have been positive ones,” Elzweig added.

Other risk-avoidant motivations, including fear of the unknown and stress of the move, were dominant factors in keeping fence sitters from moving, with younger and especially female advisors exhibiting the greatest levels of risk aversion.

The Fidelity study found that advisors took eight months on average from contemplation of a move to leaving their former firm. It said advisors who moved found talking to other advisors who moved was a key influence on their decision. And it found that paperwork and technology were the biggest hassles involved in the move.

Bellomy Research conducted the study for Fidelity late last year.

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