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Mindy Diamond, CEO of recruiting firm Diamond Conultants

Industry Spotlight > Switching Firms

Should You Switch Firms? Straight Talk From a Top Advisor Recruiter

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Though there’s fierce competition for top advisors, to remain with your current firm or leave for another is still a tricky decision — and deep due diligence is in order.

“Transition deals being offered [by wirehouses] are huge,” says Mindy Diamond, CEO of Diamond Consulting, a leading recruiter of financial advisors, in an interview with ThinkAdvisor. ”The number of options that a high-quality advisor can consider is more robust than ever before. So if a firm wants to recruit, they need to pay up.”

Many independent broker-dealers, regionals and RIAs are offering extremely sweet deals too.

In Diamond’s new book, “Should I Stay or Should I Go?” she covers everything from “Critical Questions You Should Ask Yourself” to “The Economics and the Negotiation Process.”

In the interview, she unpacks do’s and don’ts. For example, “It’s not enough to put the deal in writing. The onus is on the advisor” to conduct thorough due diligence.

And: “It should be an absolutely stealth operation. If your firm finds out you’re looking elsewhere, you’re jeopardizing your position,” she warns.

Host of “The Diamond Podcast for Financial Advisors,” the veteran recruiter also explains the transition strategy of “shrink to grow.”

“If you don’t have the willingness to lose a certain amount of clients … you probably don’t have the risk appetite to move at all,” Diamond maintains.

Here are excerpts from our interview:

THINKADVISOR: You write that there’s hot competition among wirehouses to make the biggest pay deals with advisors. Please elaborate.

Transition deals being offered are huge. The number of options that a high-quality advisor can consider is more robust than ever before. So if a firm wants to recruit, they need to pay up.

Many independent broker-dealers and RIAs pay transition money, not as much as the wirehouses but enough to make it attractive.

The independent space has expanded exponentially. And these firms are all legitimate options for advisors.

What prompts an advisor to change firms?

Ninety-nine times out of a hundred, advisors are quality people who want to make sure they get a good deal.

And they’re moving for the right reasons. They’re limited: They want better client service, to grow faster — things they’re not able to [get] now.

What’s the most important change among advisors that’s occurred in the last couple of years?

Especially among top advisors, it’s that they view their [practice] as a business with business enterprise value.

It used to be when they worked at, say, Merrill or Morgan Stanley, they [felt they were] a Merrill advisor or a Morgan advisor. They didn’t have the feeling that they owned their business.

What if an advisory operates on a small scale managing a low level of assets — is that considered a business enterprise?

No matter how much revenue you generate and how many clients you have, you’ve built a business that has value.

As a fiduciary, you have the responsibility to make sure you have access to everything they need and deserve.

You have a responsibility to yourself to make sure you’re set up in the best possible way to maximize the business for [your successor].

What about solo independent planners who interact with clients online only and have low AUM? Does that operation have business enterprise value too?

Definitely. If you really care about your clients and the value of what you’re building, even the most unsophisticated business has value.

What are common mistakes advisors make in leaving one firm to go to another?

First, it should absolutely be a stealth operation. If you’re exploring while you’re employed by a firm, you certainly don’t want to do anything to jeopardize your status within the firm.

What if your company discovers you’re looking around?

You’re jeopardizing your position because as an employee, the firm has the right to terminate you.

It’s not that exploring elsewhere is a terminable offense. But technically, if you’re a fiduciary employed by a firm, you definitely do not want that firm to find out you’re looking because they can put you under a microscope and find a reason to terminate you.

You write that it’s a mistake to rely on a verbal promise or handshake when making a deal. Why?

Because the deal isn’t memorialized, and something could change. Also, if you’ve been made an offer by a branch manager and between the time you get the offer and when you move, that manager leaves or is promoted or demoted, you’re in trouble.

So the thing is that you need to get everything in writing?

It’s not only important to get the deal in writing; it’s really important to do a thorough and deep due diligence. The onus is on the advisor to do that.

The other thing is it’s important to have an advocate or agent who knows the questions to ask to determine that they’ll have everything they need to keep their clients happy.

Why is it critical to visit the firm’s home office when considering an offer?

[For one], it gives you the opportunity to meet senior leadership.

You’re looking for a firm that thinks of their advisors as their clients and are treated with respect.

Get a sense of the culture: How do they treat their assistants?  What’s the office [vibe] like — are people smiling or miserable? Is it an open and collaborative environment?

A good way to get a sense of the firm is to ask why advisors leave: Is it because they feel limited, or the firm is too bureaucratic, or they want to grow and couldn’t, or they want access to private investments and concierge services and can’t get them?

Knowing who owns the client is vital. Right?

As long as you’re a W-2 employee, technically the firm owns the client, with the exception of Raymond James.

They write into the contract that the advisor owns the client. They look at their advisors as [their] clients [in whom] they have an investment in their happiness and support.

Many firms have that belief, and that’s what you’re looking for.

You write about the concept of “shrink to grow.” Please explain.

Some clients won’t follow you, and that’s shrinkage. But you can also [choose to] leave some clients behind to set yourself up for the best possible growth opportunity.

How does attrition by choice occur, then?

For example, you’re taking your book upstream and don’t want to service clients that are at the lower end.

If you don’t have the willingness to lose a certain amount of clients, whatever small percentage that may be, you probably don’t have the risk appetite to move at all.

Where do advisors stand regarding establishing a succession plan?

For the last couple of years more advisors have succession plans because [wirehouse] firms really encourage them to partner up; and that creates a, sort of, natural succession plan.

And firms’ retire-in-place programs provide that the next gen will inherit or buy the advisor’s business. That’s predicated on the fact that they have a succession plan.

What about advisors who prefer not to work in a partnership?

Those who don’t want to work on a team are left without a successor.

What happens to their business when they die?

That’s the issue. If you don’t have a succession plan, the value of your business plummets because there’s way less guarantee that the clients will stay if they’re not attached to a partner or someone else on a team.

When it’s a difficult decision between taking a new opportunity and staying put, your advice is for the advisor to stay at their current firm. How come?

It’s disruptive to move; so unless you believe that making the move could be really needle-moving, stay.

A move should be more than just marginally better.


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