You may have heard this before, “If you change your broker-dealer, you’re going to lose 30% of your book.”
It’s fairly common for advisors to make blanket statements such as this about client retention. And while it is possible to lose clients, the devil is in the details: where are you leaving from, where are you going to, and why.
If you’re going from a bank to an independent broker-dealer, a 30% or higher loss of your client base is quite common. This often is due to non-compete clauses and bank legal maneuvers to prevent your clients from moving with you.
However, if you are moving from an independent broker-dealer to another independent broker-dealer, retention numbers are much higher, with losses of 15% or less the norm.
Certainly, other factors weigh in to determine client retention, such as the quality of your relationship with your clients. Or, in the case of wirehouse advisors, did you build your foundation on the fact that your clients should be with you because of your broker-dealer’s name, or because of your abilities, qualifications and reputation of being trustworthy?
When we consult on broker-dealer change, advisors frequently ask, “How should we discuss our change of broker-dealer?”
Invariably the best approach boils down to “Your change of broker-dealer needs to focus on how it will benefit your client–not how it will benefit you!”
Weighing Client, Advisor Benefits
How a move benefits the client versus the advisor varies, with many an advisor being tripped up on how to communicate the move.
In the case of wirehouse-to-wirehouse movement, historically it has been the advisor who benefits most from a large sign-on bonus, while the client benefit is marginal at best.
We view the new DOL fiduciary rule as a recruiting gift to advisors in terms of justifying a move that will benefit their clients.