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Retention Plans, Bonuses and Your Future

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The question for financial advisors is: What role should – or shouldn’t — retention payments play in determining the next career move? The answer, as it has always been, is not much.

Some Wall Street brokerages are offering “retention awards” to financial advisors they hope to keep on board as they merge with competitors and form joint ventures. The offers are meant to compensate valued advisors for the inevitable disruptions during the combination of platforms, branches, and operations.

As politically unpopular as these offers may be, firms fear losing key financial advisors even more than the wrath of Sen. Chuck Grassley, who recommended suicide to AIG bonus recipients. Despite the turmoil on Wall Street, retail advisors remain mini-profit centers and have many more employment options than virtually any other financial professional.

The question for financial advisors is: What role should – or shouldn’t — retention payments play in determining the next career move? The answer, as it has always been, is not much.

Even before the economic crisis, relatively few advisors moved simply for a big payday, although that certainly did happen in some cases. But, truth be told, more basic principles of business planning have governed and will continue to govern how, when and if an advisor should switch firms.

More than ever, advisors need to determine if their current firms provide the best environment to service clients and expand their businesses. Specifically, they need to be confident that the firm’s platform will continue to meet client needs and that management can instill confidence in the strategic direction of the firm.

In the current economic crisis, advisors also should examine whether bad news concerning their individual firms is hurting their ability to service accounts, maintain clients and win new business. If enough clients begin to express discomfort with a firm – bonus or no bonus, it is probably time to go.

Advisors are also asking whether they should remain with firms that don’t offer any retention packages or make “below market” offers. Again, advisors first need to address the business basics of whether the current home base reasonably serves their needs (or not). If the answer is mostly “yes” then I would view any retention offer as a “risk-free premium:” You are getting an upfront payment at a place you like and without the risk of losing accounts and the operational hassle of a move.

Let’s take a closer look at firms that offer nothing: Once I would have told advisors to seriously consider leaving. I would have questioned that firm’s basic commitment not just to the individual but to the retail business itself. But in this day and age, some firms are afraid to offer bonuses at the risk of bringing on a round of public humiliation from Main Street and Capitol Hill. No one wants to be on the receiving end of a public tour of “Wanton Wall Street Bonus Recipients.”

To avoid that fate, firms that are offering payments to advisors are assiduously avoiding the term bonus. Instead they say they are extending “retention awards.” Bonus is clearly a four-letter word, a symbol to many of Wall Street’s indifference to the suffering it caused so many innocents.

On Wall Street and in much of corporate America, risk and performance measurements seem to play no part in compensation – much to the detriment of the economy. But just as bonuses should not unnaturally reward bad behavior on Wall Street, retention creased correspondingly.

Reach executive recruiter Mark Elzweig at [email protected].