Independent business owners associated with broker-dealers have a real chance today to capitalize on the frustrations that wirehouse advisors are experiencing with regard to increasing compliance burdens, lack of support and compensation limitations.  

A big problem, however, is that most of the firms these principals represent are not positioned properly to benefit from this unique opportunity. 

Even in the case of top independent firms that are growing at a fast clip, principals often feel they are leaving chips on the table because they can’t seem to recruit the top talent and assets they desire.  They worry that organic growth alone is not enough to allow them to remain competitive and that what got them “here” will not be enough to get them “there.” There are many reasons why these firms are struggling to grow , and they include:

  • their firm’s “value proposition” is lacking the “sizzle” that would resonate with this audience
  • their firm’s platform is not robust enough
  • the firm’s principals lack the experience and skills to be able to recruit successfully
  • the firm’s broker-dealer is not doing enough to support the firm in providing the thought leadership, support, and resources that business owners require 

Fred and Steve’s Story

Take the example of Fred and Steve, principals of a $600mm independent firm in the Pacific Northwest.  Their firm is recognized as one of the top, fastest growing firms in the industry and has never lost a client in it’s 25-year history.  Their pipeline is bursting at the seams with prospects and client referrals and they are firing on all cylinders, yet they have not been able to recruit a quality advisor to their firm in the past three years.  And, while they have built a phenomenal infrastructure on their own, they have not had the opportunity to leverage economies of scale.  If they could add even one or two advisors with meaningful assets to the firm, they could add revenue without taxing their staff or capacity.

As Fred and Steve age, it becomes more important for them to be able to recruit younger talent to the firm so that they can remain relevant to the next generation of clients and avoid the issue of attrition taking its toll on their future growth prospects.  The team approached my firm about their current frustrations and desire to recruit, and we had a productive dialogue. I shared the following advice:

  • The broker-dealer model in general can be somewhat limiting in terms of platform and product, and in their case it was definitely affecting their growth potential.  Without access to a robust platform including alternative investments, private banking and lending, trust capabilities, and cutting-edge technology, for example, most wirehouse advisors will see your firm as inferior.  I suggested they ask themselves if they believe that their firm and platform are the best there is- not only to serve their existing client base but also to attract higher net worth prospects and the advisors who serve them.
  • You are competing against every other independent firm that wants to grow by way of recruiting, and all firms are looking to tap the same pool of advisors. Without a truly differentiated story (such as potential for equity ownership, access to capital to be used for transition incentives, world class platform, and more), you won’t stand out in the crowd and you will severely limit your chances for successful recruiting.
  • You should expect more from your broker-dealer.  For example, they should provide you with recruiting assistance - possibly in the form of warm leads, capital to make acquisitions, a fully robust platform, coaching and mentoring on how to recruit, and introductions to third party search firms.  If your B-D is not providing this type of assistance, it may be time to consider other alternatives.

Fred and Steve took my advice to heart and are currently exploring many options including changing broker-dealers, or becoming an RIA hybrid firm.
The Bottom Line

More than ever, principals of independent firms need to determine if they have the support and horsepower necessary to attract top talent and grow optimally.  Many business owners believe they have the appropriate window dressing needed to attract top talent, but often they are incorrect.  When sophisticated advisors look behind the curtain, they need to be more than sufficiently impressed with the capabilities of the firm and the broker-dealer behind it.  They need to see ways in which the firm  could help them grow faster – specifically by way of access to the best in class technology, research, solutions and products available in the industry today.  If you feel that your firm could be lacking in these areas, it will most definitely affect your ability to recruit the kind of advisors you seek.  The good news is that there are excellent alternatives to get you from “here” to “there” and fuel your growth beyond your expectations.