Why Advisory Firms Are Chasing 'The Same Person'

Testerman argues that it's usually a “triggering event,” such as a merger, that prompts an advisor to want to switch firms.

BrokerHunter is a partner of Sanford Rose Associates, a recruiting aggregator, which gives BrokerHunter more recruiting tools common to executive search firms in other industries, says Testerman.

"This has allowed us to really scale up our firm and apply some best practices to our industry," he maintains.

In the interview, Testerman emphasizes that most firms are chasing “the same person” — the highly desired larger producer with portable assets.

Here are highlights of our conversation:

THINKADVISOR: Are advisors in a position to be picky about moving firms?

DAVID TESTERMAN: Oh, yeah. Everybody’s chasing around for the same person, for the most part; and the larger a producer, the more that’s the case.

When you get around $25 million, $30 million under management and you’re a producer, you have many options — a lot of firms would be happy to take you on.

The industry has not grown headcount in more than 25 years; it's been shrinking a little bit. Fewer advisors are controlling more assets. But the training of advisors into the industry is still extremely difficult.

THINKADVISOR: How do you define producer?

TESTERMAN: If they have a portable book they can bring to another firm. Our clients want advisors who can bring those assets and relationships with them to the new organization.

It gets a little muddled when you go into the RIA world because those are typically a different model from a rainmaker-type of role.

Some large RIAs already have the assets, and they’re bringing in an advisor to manage the client relationships.

Generally, when firms are recruiting, they would much rather go with an advisor who already has a book; and they’ll spend a lot of money to do so.

THINKADVISOR: What typically prompts an advisor to want to switch firms?

TESTERMAN: Usually the impetus is that they want to find a platform for a different situation that will help them service their clients and grow their business.

Almost every firm from RIAs to independent broker-dealers to wirehouses to regionals are always looking for producers with portable assets. That’s the same person that everybody’s chasing; they’re highly desired.

And the more fee-based a business is, the more desirable an advisor is because of the predictability of their revenue stream.

THINKADVISOR: What do advisors want most when they decide to move?

TESTERMAN: From a wirehouse to a wirehouse, there’s probably a cultural aspect to it. There is certainly a huge financial aspect, especially when you’re going from a wire to a wire or a wire to a regional in the W-2 space.

I think a lot of advisors evaluate when they come to the end of their current deal and see if their firm still meets the needs of where they want to go.

There’s usually some triggering event that causes somebody to start exploring what’s out there. Sometimes that’s a merger or a firm having financial trouble that causes people to look around.

THINKADVISOR: Are there any emerging recruiting trends?

TESTERMAN: With the advent of AI, it’s hard to anticipate what the next hot area is going to be because technology changes so rapidly.

Just the way advice is delivered is probably going to change pretty dramatically.

There’s a lot of money flowing to the RIA side from private equity and other investments.

We’re still waiting for the succession opportunities that have been talked about for a lot of years: the older advisors aging out and passing those assets on. That did not happen.

They’ve talked about it being a huge trend over the last decade, but a lot of advisors don’t retire at the traditional age. They work well into their 70s.

But I think there’s still opportunity there. A lot of these advisors have built a great book, but we’ve seen situations where a lot of junior advisors are brought in and then get a little bit disenfranchised because the lead advisor is not retiring.

THINKADVISOR: What’s one big change that you see coming over the next decade?

TESTERMAN: You have to figure out a way to charge for the advice or the value you’re providing. That’s where the RIA world has done a good job of articulating that value proposition to high-net-worth folks and doing it on a fee basis.

THINKADVISOR: Many advisors want ownership. Don’t they?

TESTERMAN: A lot of times they’re made a partner or get an equity stake in the practice.

The independent movement from a W-2 advisor to a 1099 reflected that.

THINKADVISOR: What qualifies an advisor for your firm’s full-service effort?

TESTERMAN: For producers, usually the minimum client that we work with needs to have $15 million or $20 million portable AUM, and we work with teams all the way up to $1 billion.

THINKADVISOR: To what extent do you use AI?

TESTERMAN: We have an in-house AI tool and use AI heavily. We use it for research and very, very heavily to automate a lot of rote tasks that we need to do in the search process.

It hasn’t replaced the human connection, but it has accelerated how fast we can make that connection.