Recruiting Advisors Turning Independent,” released on April 27, discusses that and more, and is part of Schwab’s Market Knowledge Tools. Schwab’s tools help advisors make the transition to independence and can also help RIA firms find talented advisors who are a good match for their firm
“With a thoughtful recruiting strategy in place, adding experienced advisors can be a great way for firms to gain new talent, serve new client segments, uncover potential growth and succession planning opportunities, and boost revenues,” said Bernie Clark, senior vice president and head of Charles Schwab Advisor Services, in Schwab’s announcement.
Schwab’s white paper includes “case studies” of how three RIA firms–each with a different type of growth philosophy–brought seasoned advisors aboard. What they learned can be useful to other RIA firms that want to bring on experienced professionals.
“Business strategy:” Thoroughly understand your firm’s “long- and short-term business goals, core values, and the personal objectives,” so you can determine what characteristics of ideal seasoned advisor would complement your objectives.
“Compensation and equity:” These should be “consistent with the firm’s existing compensation philosophy, be competitive with the market, and be specific on incentive pay and ownership issues.”
“Recruiting and cultural fit:” Ask yourself: What characteristics of the firm’s culture are the most crucial elements for new people to embrace? Then you can assess what you’re looking for in new employees or partners.
“Operational fit:” Can your platform and back office “support the new business brought on by” additional advisors?
“Legal issues:” Can the new recruits bring their clients with them? Some can and some may not be able to–obviously good to know up front. Firms and advisors both need legal representation. Would it benefit your firm, recruits and potential new clients for you to join the Protocol for Broker Recruiting?
“Onboarding and transitioning:” Be sure to understand how long it can take for advisors to transition over to a new firm. There are steps you can take to expedite this transition.
Bringing B/D reps into the RIA world
There’s an additional consideration when bringing wirehouse broker/dealer reps into the RIA world: Helping the rep. make the transition from selling products that are suitable for customers in a brokerage setting to recommending solutions to clients as a fiduciary in the RIA world. This editor is a member of The Committee for the Fiduciary Standard.
The culture of sales and the suitability standard in wirehouses is starkly different from the fiduciary duty required by law of an investment advisor. Of course, this is not lost on those who run RIA firms. But the distinction is very important, not every broker will be able to make this transition successfully, and there is a lot of support needed, as well as a steep learning curve for the fiduciary process. The knowledge of portfolio management, asset allocation, diversification, disclosing compensation and all other material facts, avoiding conflicts and when they inevitably arise, resolving them in the client’s favor–this is not trivial.
That said, RIA firms are the “fastest-growing destination for advisors exiting full service wirehouse brokerage firms,” according to “Advisor Migration: The Changing Landscape of Retail Distribution,” a Cerulli Associates September 2009 report cited in Schwab’s release.
Comments? Please send them to firstname.lastname@example.org. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.