Unhappy where you are or just curious about the choices out there for you? I hear from advisors on both fronts, who say they get recruited constantly.

Not every firm, however, is the best choice for every advisor. Here is a starting point for figuring it out.
First off, it makes sense to consider a move only if your book of clients is actually portable. This is especially important if you have never made a move before, and it can help you before considering your options. Make a realistic self-assessment: Will my clients follow me if I move?

I recommend that an advisor move only if he or she has the realistic expectation of moving 80% or more of the revenue-generating assets. Are you a wirehouse advisor who has inherited substantial assets from other advisors who have left or retired? If those households were with your firm for many years even before you worked with them, what makes you think that they would move with you?

Also, are some of your clients also colleagues? They will not be allowed to move with you while they are still employed at your old firm.

Can you honestly say that your top client relationships view you as a trusted advisor, an essential part of their financial life? Go through your relationships one by one, being sensitive to how certain clients are connected with one another. If you still are confident that your accounts will follow you, it may be time to think of alternatives to your current employer. But finding your right fit may depend on your outlook. Cynical advisors and managers tell me, “it’s always about the money.” If that is indeed the case, consider a wirehouse.

BIGGEST FIRMS

Morgan Stanley, Merrill Lynch, UBS and Wells Fargo are still the ones giving the biggest deals. For the best advisors, with production well above $1 million, a clean compliance record and a fee-based business, wirehouse transition packages are above 350%.

There are advisors who can see themselves only with one of the biggest firms, not just because of the deals, but because of the “big firm” culture.

One wirehouse advisor says: “I thrive on the competition in a big office, a big firm. I like the camaraderie, the softball games, the after-work drinks. I have some shared accounts with colleagues. I can’t see myself working outside of the wirehouses.”

Like others interviewed for this article who did not have permission from their firms to speak publicly, this advisor requested anonymity.

CULTURE SHOCK

If big firm culture and big upfront checks were the only reasons that advisors made a move, the four major firms would be dominating as never before. But top advisors from smaller firms or from the independent channel have typically shied away from the biggest brands. One reason is that the transition requires too much of a culture change, say advisors I have interviewed.

This may explain why wirehouses have slowly lost market share to other channels since the financial crisis, in terms of client numbers and number of advisors employed. Morgan Stanley, for example, reportedly had 20,000 advisors at the time of its merger with Smith Barney in 2009. Its most recent quarter counted about 16,000.

REASONS TO GO REGIONAL

I spoke with several advisors who had moved to a regional broker-dealer and asked them to define what “culture” meant to them, and why they had chosen the firm they chose.

Some made the move because they wanted greater recognition, to become bigger fish in smaller ponds. “My business is just more important to my new firm than it ever was to my old firm,” one ex-wirehouse advisor says after going to a smaller regional firm.

The advisor says that his old employer failed to act immediately after the unexpected departure of his sales assistant.

At his new firm, he says, such a departure would trigger a more urgent and immediate response, because his production is more critical to his new branch’s profitability.

Other advisors are driven to move by policies. Big firms create all-encompassing rules and procedures, often defying common sense, to make sure advisors act in the best interests of their clients. For example, a former Morgan Stanley advisor told me that she could not get a Roth IRA opened for the daughter of a longtime client by April 15, because the client couldn’t produce the child’s original Social Security card. That same advisor, now at a regional, says the new firm offers a bit more latitude.

A manager at one of the regionals said he spends time developing a level of trust that allows for such flexibility. “I truly get to know the people here before they join, and keep up with them after,” he says. “My team and I can therefore give more leeway to them as professionals. We expect them to do the right thing.”

Wirehouse advisors at all production levels are curious about independence. I’d say 90% of the current wirehouse advisors who engage me to help with their search for a new home ask about going independent.

Here’s a typical example: A wirehouse advisor told me she was exploring independence after she became fed up by the firm’s latest payout changes.

“I would want just one firm to put it in writing that the compensation pay would not change for, say, five years,” she says. “I just want to manage my clients’ assets, make financial plans without worrying that the mother ship is changing things around me.”

But, like others, she admits that she fears the unknowns of running her own business. She is torn, although still curious enough to take time to learn more about a possible move away from the employee advisory channel.

FORMS OF INDEPENDENCE

The choices within the broad framework of independence are varied:

  • Advisors can forgo FINRA, become RIAs and only charge fees. 
  • They can join independent broker-dealers of various sizes, both public and private. 
  • They can join a group of partners who want to add scale to their businesses. 

It’s worth noting that the independence movement includes entire industries of service providers that present entrepreneurs and their clients with investment choices, Web access and state-of-the-art technology that equals or exceeds the capabilities of the largest brokerage firms.
The choices can come off as complex, and again there is also fear of the unknown, causing some advisors to hesitate on even considering independence. One advisor asks why he should go independent, when he dreads the concept of managing his own payroll. “Ever heard of ADP?” I ask, referring to the payroll company.

Another advisor worried about trade execution, statement and report generation, and providing his clients with online access to their assets. I assured him there was a competent custodian for the independent solution he was exploring, and with a solid reputation.

With the biggest firms offering the most flexibility and lucrative upfront money offers and smaller firms adding capabilities that help them match larger players, advisors must do their research before considering making a move that meets their interests and needs.

But they should also take comfort in knowing that others before them have already moved from firm to firm, or even from channel to channel, and proved that clients are loyal to the advisor and not the firm or the business model that was chosen.

Knowing that should give you the confidence to take the time to find the perfect fit for them and you. It’s not always obvious where one should go.

And it’s even possible the best solution is a firm that you never heard of.

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