Recruiting Deals Offer More Than Money, But the Money's Really Good, Too

Feldman — who set up his firm in 2002 after a stint as a producer of TV shows, commercials and independent films and then later worked at Stockbroker.com — says there's a “rush” to acquire veteran advisors’ assets under management today; he also emphasizes that partnering with a senior advisor who lacks a succession plan is a big draw for solo practitioners.

Here are the highlights of our conversation:

THINKADVISOR: What’s the biggest challenge for the financial advisor seeking to move firms?

JEFF FELDMAN: A lot of hard work and stress go into it and a certain amount of risk: If your clients don’t follow you, that’s a risk to your livelihood.

But there’s security in knowing they’re not reinventing the wheel: There is a 10% advisor turnover every year.

It’s about doing the due diligence and recruiters giving them a sense of peace of mind. It all comes down to what’s best for the client.

THINKADVISOR: What’s the difference between a wealth manager and a general financial advisor?

FELDMAN: A wealth manager might be an asset manager. The terminology has evolved from stockbroker to financial advisor to wealth manager. But at the end of the day, it’s about advising the clients on their wealth.

They’re now advising on the whole financial picture, including financial planning, retirement planning, planning for the next generation and philanthropy, whereas it used to be they were just doing investments.

THINKADVISOR: What makes an advisor, or wealth manager, really stand out?

FELDMAN: Taking a 360-degree view of the client: their current needs, future goals and planning for those. It’s more than managing money.

Managing wealth is very emotional. When the market goes down, clients need advisors for emotional support to talk them off the ledge.

THINKADVISOR: Are more advisor partnerships being formed nowadays?

FELDMAN: There’s a ton of solo practitioners who might consider making a move to be a big carrot — going to a firm where they’d be in a partnership where a longer-tenured advisor doesn’t have a succession plan in place.

They can be that succession plan, taking over the book of business when the [senior] advisor eventually retires.

THINKADVISOR: Any other benefits to such a move?

FELDMAN: Becoming a partner in a larger enterprise has some attractiveness for advisors that want to monetize their books because of the equity value they would have in a bigger organization; that is, the scale that it brings vs. just equity in their own practice.

THINKADVISOR: Is the trend to advisors going the RIA route helping to expand your business?

FELDMAN: For me, as a recruiter, there are now many more channels to look at.

Firms are paying recruiters as aggressively as they’re paying advisors to join their shop.

[The RIA trend] definitely helps give advisors more options to consider, except that the due diligence becomes longer and more complex.

It takes more time to really flesh out what’s best for the advisor and their business.

THINKADVISOR: What’s the strongest trend in advisor compensation?

FELDMAN: Transition packages continue to go up. It’s more competitive. The wirehouse and regional firms are more aggressive on the upfront [money] and addressing the deferred.

Firms are offering more in upfront money that’s guaranteed and the ability to address unvested deferred comp. They aren’t just looking at 12b-1 [fees] and assets under management but at unvested deferred comp and trying to cover a portion, if not all of that, in a transition package.

And, on the back end, the wirehouses and regional firms are trying to help lower advisors’ AUM hurdles so they can hit their back-end bonuses much earlier.

That’s good for the advisor, the hiring firm, and it resonates as a successful hiring when they’re asked to move over.

THINKADVISOR: Are independent BDs also getting more aggressive in their offers to advisors?

FELDMAN: Much more, and they’ve become much more competitive as well.

There’s a rush to get the assets of longer-tenured advisors before they get locked up in a sunset package.

I’ve seen more advisors later in their career, in their 60s, that have been at a firm for 30 years picking up and making a move.

Reason No.1 is that their next-gen advisors don’t necessarily want to be at the firm they’re currently with for the next 10 or 20 years.

So they’re able to convince the senior partner that there’s a better place to serve their clients, to grow the business and to leave a legacy.

And the economics make greater sense for the retiring advisor and certainly for the inheriting advisor to make more.

If they’re doing a lateral move from wirehouse to wirehouse, the advisor has the ability to monetize their book twice: once with the transition package and again with the sunset package at the new firm.

THINKADVISOR: If a wirehouse or regional advisor isn’t sure that going independent is right for them, what should they consider?

FELDMAN: They have to figure out if they’ll have the resources that they currently have.

But the technology has caught up, and in some cases exceeded, what’s available in the W2 channel.

When advisors leave to set up their own shop, they [need to] feel they have the tools and technology to service clients as well, if not better.

Once they determine that, there are multiple layers to sort through and do due diligence on.

THINKADVISOR: Such as? 

FELDMAN: Do you want to handle everything in-house or use service-platform providers to handle the business side while you can focus on the client relationship and investment management?

THINKADVISOR: As a recruiter, are you making use of your background of producing feature films and commercials by recommending, perhaps, that your clients make videos?

FELDMAN: I don’t get into the marketing part. I dig into the details of negotiating a move to another firm and guide the advisors through that whole process.