After reading the comments on my first two posts about “who owns advisory clients,” I have to say that you all make good points, but at the same time, you miss THE point. It’s an emotional issue, to be sure: One fraught with feelings of disloyalty, betrayal, and ingratitude. Consequently, it’s easy to react to those highly-charged feelings with knee-jerk accusations of underhandedness, client-stealing, and yes, Morris, illegality and unethical behavior. Then, once firm owners have morally rationalized their gut reactions, the next step appears clear: have new professionals sign non-solicitation or non-compete agreements so this sort of thing can never happen again.
Let me be as tactful about this as I can: you’re focusing on the wrong things, and it’s leading you to the wrong solution. Mary Schuh captures the real issue succinctly when she writes: “How does the RIA that provided systems, client service employees, office space, benefits, and everything else that goes into servicing the client to the departing employee get reimbursed for their contribution to the client over the years if the departing employee can “hands off” walk away with the client?”
How does the RIA that provided systems, client service employees, office space, benefits, and everything else that goes into servicing the client to the departing employee get reimbursed for their contribution to the client over the years if the departing employee can “hands off” walk away with the client? The short answer is that they don’t get reimbursed.
And that’s the point: Advisory firms have a great deal invested not only in their long-term clients, but also in their long-term professional employees who work with those clients. And historically, the independent advisory industry has gotten a very low return on that investment as they watched their clients and professional employees walk out the door, time and time again. This trend isn’t the exception: it’s by far the norm.
There is only one realistic solution for protecting those investments: create an environment that encourages those young, or not so young, professionals who work with some of your best clients to stay at your firm, rather than leave. That will include compensation that reflects their contribution, a clear career path, and probably the ability to become a partner in the firm. If you don’t have those things, and the vast majority of firms don’t, then you only have yourself to blame for losing your clients, your professionals, and you investment in both.