What is the current environment for financial advisors, Mitch, and how is it affecting your firm and its work with advisors?
These are big questions, since there are so many different types of advisors – wirehouse, independent, bank, insurance company, etc. We work with advisors who want to go to some kind of independent alternative. Many are looking, because their clients are frustrated and, in turn, the advisors are frustrated.
Some of the brand names that used to have credibility no longer do, and clients are questioning these firms’ ability to manage their money if they can’t manage their own assets any better. So I think there is a lot of confusion out there, and many advisors are kicking the tires to see what their options are.
Seventy per cent of wirehouse advisors who do make a change are going to another wirehouse, mostly to try to get whole financially. In some cases, they have lost 90 percent or more of their golden handcuffs, because of the drop in stock values, and so they are trying to make that up by going to another wirehouse and getting a check.
Some are going independent, either through a broker dealer, through a custodian like Schwab or through both — with one of the hybrid-type firms that will take their licenses and allow them to operate their own RIA.
At our firm, Turning Point, we do not move brokers from one wirehouse to another. In order to do that, you have to work regionally and really know the territory. We work nationally and know the independent space.
Most of the advisor placements are made on a contingent basis, and we do not get paid until we actually place someone. This is frustrating for us, because many deals go in another direction, and we are not able to control the advisor who is looking.
In the current environment, advisors are looking in many directions, and it becomes difficult to work with them when you do not have control. (That is just the nature of the work we do.)
To combat this reality, we are focusing on working on retained-type situations in which we find advisors for companies that have unique opportunities in specific locations. We get paid a portion of the fee for doing the looking and the balance when the placement is made.
The firms we work with, in turn, have some skin in the game and have the right to expect certain levels of performance from us. We report to them regularly on our progress and work well in that kind of an environment.
What trends are you seeing that are proving to be opportunities for advisors, and how about challenges?
Many investors are dissatisfied with their advisors either because of performance or because of the poor communications they have had, and so they are ripe to be picked off by another advisor. That is a great opportunity for any advisor who wants to grow his or her business.
For advisors who want to grow their organizations, this is also an excellent time to be recruiting others who may be more interested in going to an existing non-wirehouse organization than in going independent. The volatile market is always a challenge but one that can be mitigated by working effectively on managing client expectations.
What has been your firm’s greatest success in the past year or so?