Since 2001, I’ve made over 60 due diligence trips to independent broker-dealers. What stands out are the firms that have the ability to connect, not merely point out their list of strengths.
One particular broker-dealer president shared the humble beginnings of his firm. When he and a group of his colleagues felt that their broker-dealers weren’t addressing their needs, they formed their own.
They intended to form a broker-dealer “by advisors for advisors,” anticipating that other advisors who shared their concerns would want to be part of that kind of environment.
During our discussion, this individual showed vulnerability and transparency as he explained that “early on, we didn’t really know what we were doing on many levels. In spite of ourselves, we outgrew our facility as more advisors joined.”
This group figured things out along the way through trial and error, ultimately growing to a midsize broker-dealer. His frank discussion provided me with a strong connection that deepened my relationship and recruiting activity for years afterward.
Everyone loves an underdog story of overcoming obstacles as we learn from our mistakes because we all started from humble beginnings which when shared, can build bonding connections with others.
“We might impress people with our strengths, but we connect with people through our weaknesses,” said pastor Craig Groeschel.
Arnold Breaks the Mold
Larger broker-dealers can be especially cold and impersonal, seemingly devoid of vulnerability or personal connection. Breaking that mold, LPL Financial CEO Dan Arnold spoke to his advisors in April of 2018, taking a position of humility as he explained that significant changes were coming.
Demonstrating vulnerability, Arnold opened up about the firm’s weaknesses, admitting that LPL had difficulty recruiting NPH advisors and that there was dissatisfaction among the advisors. The changes they were implementing largely came from suggestions from their own advisors.
This was a connection moment between management and advisors that you rarely see at larger broker-dealers. Since that moment, the changes at LPL have been turning the ship to greater recruiting growth and higher retention.
Lack of Connection, Low Client Retention
In our recruiting activities, we are witness to the depth of connections not only between advisors and their broker-dealer but also advisors and their clients.
When an advisor lacks connections with their broker-dealer, they show little hesitation in leaving. When an advisor changes broker-dealer, those that have little connection with their clients often experience a low client retention rate when they make their move to another broker dealer.
Advisors that frame the reason their clients are with them being because of the name recognition of their broker-dealer, rather than the quality and depth of relationship with their clients, are destined for a slippery slope when they need to change broker-dealer.
Financial services is a highly analytical business, so human dynamics like vulnerability can be a low priority — much less be on our radar.