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Practice Management > Building Your Business

The Best Reason to Change Firms

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Some financial advisors chose to change firms frequently. Many people assume they do it just for the money — and a lot of money can be involved.

In my experience working with advisors, though, money is rarely the prime motivator. Usually, the advisors have a business problem to solve that can’t be addressed at their current firms.

It’s worth noting that the “highest bidder” is not always the winner when it comes to capturing advisors. In many cases, the advisor selects the firm that offers a new business model or better support.

The advisor’s goal is to build a practice with superior growth prospects. Upfront packages can influence the decision when an advisor is reviewing competitive offers. But the long-term outlook is even more influential.

More Pros Than Cons?

Prudent advisors understand that moves demand lengthy preparation efforts and can be stressful. Though these shifts can help them grow, moves aren’t risk-free. There are often surprises, and sometimes advisors can lose clients in the process.

Support is a big attraction. Both young up-and-comers and established pros managing vast pools of assets are attracted to firms that will front the cost of junior brokers or other team members.

These key hires can often be the catalyst for a boost in an advisor’s business. I worked recently with an advisor team that opted to join a major firm that rejected a bigger payday in favor of a deal that promised to hire and fund two junior brokers, for instance.

Advisors often expand their business by selecting firms with deeper, richer product offerings. In recent years, many advisors have done more business with existing clients by gravitating toward firms with services such as lending and alternative investment options.

In the transition process, advisors make interesting discoveries that can help them improve their business and deepen their relationships with clients. When they move and open accounts at a new firm, advisors must qualify clients anew.

This exercise often leads to the detection of fresh needs or assets. Some advisors use the move and the superior capabilities of the new firm as an opportunity to encourage clients to consolidate their assets with them.

Bigger Issues

I’ve worked with a number of advisors over the years who’ve used the cash cushion from a lucrative recruiting deal to tweak their business models. One advisor, for example, wanted to shift away from a commission business to a more fee-based model.

He joined a firm that allowed him to run money on a fee basis in one of their broker-as-portfolio-manager programs. He was confident that he’d be successful converting his current clients to the new fee-based format, and he wanted to expand his practice by attracting new clients and working with them in the new format.

During the transition, the rep decided to use part of the signing bonus he received by joining the new firm to fund some expenses related to taking time away from current accounts to prospect for new clients. He wisely used his signing bonus to fund the growth of his practice.

Another advisor deftly used a signing bonus to buy the book of business of an older advisor with whom he’d recently partnered.

Taking advantage of hefty recruiting packages, of course, has its place. When most advisors move, they do so to take their business to the next level. That’s the way it should be.


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