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Industry Spotlight > Broker Dealers

Time for a Transition (I): Changing Affiliation

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For some time now, many financial advisors have been hunkered down, focused almost exclusively on maintaining clients' confidence and doing whatever they could to minimize their losses.

While some advisors wisely recognized that the past few months have actually been a good time to try to attract new clients (particularly those disgruntled with their current advisors who may have unwisely gone into silent retreat), most were just trying to weather the storm.

But many industry analysts are saying that the worst may be over. It's probably much too early for a collective sigh of relief, but savvy advisors are thinking about the future.

There are probably many readers who put some business and career plans on hold while they focused on keeping themselves and their clients afloat. As the pressure to do that wanes, there's time and space to devote to regaining energy around plans for positive change.

Business change can take a variety of forms. In this three-part article, we'll explore changing affiliations (part one), expanding through acquisition (part two), and marketing to a niche (part three).

Changing Affiliation

As advisors think about career development they might be considering transitioning from one kind of firm to another – or from one business platform to another.

One of the changes we're seeing is what Gregg Johnson, senior vice president and director of branch office development with Securities America, Inc., calls the "move to quality." In the past, the term has been used to describe investors moving their capital to the safest possible investment vehicle or the movement of clients to advisors who employ a reputable, trustworthy business model. But Johnson says it also applies to the movement of advisors to affiliate with quality broker/dealers, who will support them as independent businesspeople and enable them to offer clients the best possible service and products to meet their specific needs.

"Now that advisors are able to turn their attention back to managing their business rather than spending all their time calming frantic clients, they can again consider making a move," says Johnson. "Clients are better able to deal with the disruption of having their accounts moved from one custodian to another, but advisors making such a move must be intentional and deliberate about communicating sufficiently to shepherd clients through the process."

For advisors who are considering changing broker/dealers or going independent, Johnson offers some guidance:

– Be sure to conduct your own due diligence. Find out just what the prospective broker/dealer does for its advisors. What kind of commitment do they have to the future development of an advisor? How solid is the b/d's own business structure? Higher payout, alone, is not a good enough reason to switch.

– While it may seem like a daunting task to make a switch, if it's going to help you better serve your clients, and enable you to build your business, then you really can't afford to wait.

– Consider joining a branch office of an independent broker/dealer as a bridge to independence. By joining an established branch of-fice you could achieve increased earning power and flexibility in how you work with clients and the investment solutions you're able to provide.

At the same time, you have an existing infrastructure to handle the logistics of opening your own office such as lease agreements, phone and technology selections, and support staff. These are not insignifi-cant advantages if are more interested in focusing on working with clients than staffing, setting up and running an office.

Options for going independent

Daniel G. Gensler, CFP(R), owner of San Diego-based RIA The Gensler Group, is a branch manager for LPL Financial, a registered broker/dealer (member FINRA/SIPC). Gensler offers three options to advisors interested in joining his firm in some way:

1. Branch-based W2 employee (full OSJ)

2. Financial Institution-based 1099 contractor (standard OSJ)

3. Independent Satellite 1099 contractor (limited OSJ)

Payouts which range from 30 – 80% and benefits which range from case design and administrative support to fully equipped professional office space depend on the chosen tier. The more support and amenities desired, the lower the payout. The less support and amenities provided, the higher the payout.

"Many transitioning advisors need and want help," Gensler says. "Setting up your own office can be a daunting task. In addition, if they are coming from a bigger firm, they are probably going to miss the social interaction and professional support that they once enjoyed if they leap from wirehouse to full independent status. Our three-tiered model provides flexibility and choice. There's always the option of moving up the ladder."

Gensler offers the following list as a basis for determining a good fit. As you interview potential branch managers, ask about and consider:

? Backgrounds of the leadership team

? Incorporated or sole proprietorship?

? Any law suits or complaints? If so, why?

? Clients-first policy? Fiduciary stance?

? Philosophies, policies and procedures

? Details on systems and processes

? Details on benefits (such as profit sharing, partial ownership, both?)

? Client acquisition strategy

? Marketing budget (fully paid or shared expense?)

? Summary of services, training and mentoring that will be received

? 1099 contractor or W2 employee?

? Concierge service for top producers?

? Team-based or silo?

"Look for similar believes, values and goals," Gensler says. "Ask to see their policies and procedures manual, look at payout grids and service options, and visit the broker/dealer's website. But don't underestimate the chemistry aspects – it's important that you connect and feel at home in your new environment."

Where to begin your search? Gensler suggests reading industry publications, talking with recruiters and talking with your peers to compare notes. Google the companies you're considering. Do they have positive or negative visibility? Check the FINRA site for claims, lawsuits and other signs of trouble.

At the broker/dealer level, Johnson says to look for financial strength, reputation and tenure in the industry, staff-to-advisor ratios, and a proven track record of investing in technology, human resources and programs that will make it easier to do business.

Practical aspects of going independent

I recently conducted an interview with three tenured, independent advisors – Don Patrick of Atlanta-based Integrated Financial Group, Clyde Wyatt of Dallas-based Navigation Financial and Arthur Cooper of Cooper McManus, a wealth management firm headquarter in Irvine, California. Our conversation, which hinges on the practical aspects of going independent and why a joining a branch office of an independent broker/dealer might be the best choice for transitioning advisors, is captured as a webinar and can be seen at:

My next two installments will focus on expanding through acquisition and marketing to a niche. As autumn unfolds, smart advisors will take a deep breath, reflect on the things that are important to them, regain energy and commit to positive change.

Marie Swift is president and CEO of Impact Communications, Inc. Additional insights, including podcasts, videos, webinars and commentary can be found at


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