Trend or red herring?
The age of the retail recruiter has come to a close, the victim of the financial crisis and brokerage consolidation.
That’s the storyline argued in the May 2010 cover story of Research Magazine. The new-and-improved dealmakers offer a pretty good case, at least superficially.
Why pay for some guy who just makes introductions when nobody in the room is a stranger? You don’t even need a recruiter to get the details on the newest deals available.
The DealMentors’ website publishes the info. All you really need is someone to dot the “i”s on a contract and try to squeeze a few more dollars from the prospective employer. And, yes — someone to talk to.
Someone to talk to. That’s the rub.
Lawyers would like you to think that they can do part-time what full-time recruiters do: collect in-depth information on the industry and provide critical analysis of trends and what they mean to your business and career prospects. Taking advice from lawyers and others who don’t focus their efforts on the nitty-gritty of executive recruiting is a bit like asking your accountant for investing advice. Sometimes, it’s interesting, but it’s dangerous overall.
Think of it this way: An accountant may be a valuable player on an investing team, but never as a leader; just so in the world of recruiting. There are other professionals who have roles to play but never as leads, which is the first reason that it’s vital to turn to a recruiter.
Skilled recruiters are quarterbacks for your career decisions – whether that involves moves or not.
I remember advising one advisor who headed a large team to stay put; he didn’t need a change of firms, but he did need additional help running his practice.
The advisor was grateful. That’s because my job isn’t just to “move” people but to advise them strategically.
Once it’s clear that a move would benefit an adviser and his clients, a recruiter has three critical jobs: due diligence in terms of selecting a new firm; negotiating a deal; and transitioning the practice.
One lawyer, who disparages recruiters as “used car salesmen,” argues that advisers would be better served by people like him.
That would be a mistake and illustrates the second reason to turn to a recruiter.
Your recruiter and attorney should NEVER be the same person. A prudent system of checks and balances requires that your contract be reviewed by a third party who has no qualms about putting the brakes on a risky or subpar agreement.
Advisors should definitely ask their lawyers to review deals as a backstop. It’s always worthwhile to get a second opinion from an outsider.
Lawyers and certain other types of professionals, however, rarely understand the retail brokerage business as well as recruiters.
Steve Insel, the same lawyer who called recruiters “used car salesmen” warned advisors that deals were about to collapse back in April 2009. “There is a mini-bubble,” Insel intoned warning that deals were shrinking.
In fact, nothing of the sort occurred – and anyone who understood the basic dynamics of the business wouldn’t have made that kind of mistake.
Just a few months later, Merrill rolled out a recruiting package that rocketed deals up to new, unprecedented levels.
Then in November, the Morgan Stanley Smith Barney joint venture unveiled deals that rivaled Merrill’s. They offered potentially 330% packages. UBS stepped up to the plate shortly thereafter.
The big deals remain in place to this day because, as I have written many times before, the demographics work in the advisor’s favor. The pool of quality advisors is shrinking and has been shrinking for quite some time.
The financial blow-up over the past two years has only accelerated the trend, and has actually increased demand for brokers. “Deals are skinnier”, opined another lawyer in the May Research Magazine article. Huh? That isn’t true either.
Consolidation within the bulge bracket firms has not diminished recruiting packages, the competition for top talent is fiercer than ever.
Those who don’t understand the inner dynamics of the industry may be deluded into believing that the career choices for top brokers have diminished as well. But that is true only for those who want to stay within the wirehouse model.
Other kinds of opportunities are multiplying.
An industry insider understands the dynamics of the advisor market like nobody else can.
Successful athletes, entertainers and other professionals at the top of their game, all have agents for a reason. They understand that a recruiter helps you position yourself as “hard to get” and makes the prospective firm work harder to woo you.
A good recruiter negotiates strategically and doesn’t allow you to waste political capital on things you can’t get.
Plus, serious well-capitalized firms all have separate funds for recruiting fees.
Advisors who negotiate without the help of a recruiter don’t get bigger deals; instead, those advisors miss things and get less monetarily and otherwise.
One person on the recruiter-is-dead bandwagon noted that branch managers are now trying to replace recruiters – but that’s an old story. Some try that for a while, but branch managers are always grateful for professional assistance to get the best advisors available.
Within the advisor recruiting community there are doubtless too many “product pushers.” But quality recruiters are consultants who offer sage advice on a variety of firms to help advisors make good career decisions.