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Industry Spotlight > Switching Firms

9 Reasons to Reconsider Switching Firms

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For many advisors, changing firms can be a colossal blunder for their careers and for their businesses.

Although I’m an executive recruiter paid to help advisors move to new venues, I don’t hesitate to let advisors know when I think they’re best served by remaining where they are.

Here’s how to know if a potential move may not be right for you:

1. Shaky Client Relationships

Do your clients view you as the quarterback of their financial lives? If  not, then you should figure out how to bolster those relationships prior to starting plans to make a move.

If clients view your firm as the primary driver of their financial planning and investment programs, then your move is not likely to succeed.

I  knew an advisor who opened new accounts by touting  the unrivaled prowess of the wirehouse firm he worked for. He regularly talked up the brand. Some years later, when he tried to move those clients elsewhere, the results were catastrophic.

2. Lots of Inherited Accounts

Overloaded with too many inherited accounts?

These accounts stayed with the firm when the previous advisor left, so why are they going to follow you?

Especially if these clients have worked with several advisors at the firm prior to your handling their accounts, it’s highly unlikely they’ll join you at your new firm.

These investors are primarily tethered to the firm and not to their advisor.

3. Too Many Small Accounts

While most advisors focus primarily on households with $250,000 in assets under management and up, some advisors do work with a large number of smaller accounts owned by clients with whom they speak infrequently.

That’s a problematic business to transport.

Advisors with larger accounts that provide a variety of services for and that are owned by clients with whom they communicate regularly are in the catbird seat when advisors switch firms.

4. Non-Transportable Products

Are your client portfolios heavily invested in hedge funds and private equity deals?

Those products may not  transfer when you move, and you’ll be forgoing both that chunk of client assets and the revenues that they generate unless you can sell them.

5. Team Issues

Are all of your key team members on board with a potential move? Do you have a team agreement that provides for an amicable division of accounts if you were to exit?

If not, you could find yourself preoccupied by bitter, contentious disputes.

6. Unvested Deferred Compensation

If you have a significant chunk of unvested deferred compensation, you’ll need to take that into account when considering a potential move. This should be evaluated against any recruiting deal that you might be offered.

Choosing a firm with a program to address unvested deferred compensation is a good solution.

7. A Book That’s In Play

If you’ve already sold your house to one buyer, you can’t sell it to another.

Likewise, if you’re a wirehouse advisor and you’ve already contracted or been paid to hand off your assets to another advisor at the firm, you cannot transfer your clients’ accounts elsewhere.

And spending money on an attorney won’t help.

8. On the Horizon

Here’s the best reason to stay with the home team: A departing advisor is about to turn over their business to you.

In that case, you’ll certainly want to stick around!

At a major wirehouse, once the transition gets underway, those accounts typically can’t be moved elsewhere for the next five years.

9. Competitive Products & Services

Also, if your firm’s offerings in key product areas — like alternatives or lending, for example — are superior to the competition and are uniquely well suited to your practice, you have a strong incentive to remain in place.

Exceptional marketing programs or sales support would qualify as good reasons not to jump ship, too.

In addition, it goes without saying that a firm that is  financially solid and with a strategic direction that aligns with your business is a place you may not want to leave.

It’s always essential to do a cost-benefit analysis when considering a potential move.

That process should include a realistic assessment of your practice and a careful consideration of whether or not the likely upsides of switching firms justify any potential downsides.

***

As head of Mark Elzweig Company, a New York-based executive recruiting firm that specializes in helping financial advisors find the right career paths, Mark brings more than three decades of experience to his work with advisors and writing for industry publications. He also is a judge for ThinkAdvisor’s Luminaries industry awards. 


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