6 Steps to a Successful Advisory Firm Transition
What You Need to Know
An advisor move typically hums along through several distinct stages.
The first step is to identify the issue at your current practice that you’re looking to address.
Once you’ve made the decision to switch to a new firm, you’ll need to get clients excited about your move.
The decision to move to a new firm is not one a financial advisor can take lightly. There are myriad factors to consider that if overlooked, can lead to serious regret and legal issues.
An advisor move typically hums along through several distinct stages. Knowing what to expect at each juncture and what is required for success can ensure a much smoother transition.
1. Decide what problem you want to solve.
Most advisors begin to explore the recruiting landscape in order to address an issue in their practice.
Are you seeking to correct a deficiency in your current firm’s platform? Is the level of sales support subpar, or are there too many constraints on your ability to creatively market your services?
Perhaps you want to monetize your business, or you need better succession planning options. Whatever the case, you’ll need to evaluate prospective firms and business models with an eye toward how they could address your fundamental concerns.
2. Do your research and perform due diligence.
This is perhaps the most essential part of the recruiting process and should never be rushed. You’ll need to chat with product specialists and advisors with a similar business profile at prospective firms.
It’s advisable to take detailed notes and to be on the alert for product areas that don’t line up properly. Desired managers, for example, must be both on the firm’s platform and approved for the program in which you need them.
I once spoke with an advisor who joined a firm thinking that all his managers were approved by the firm. While that was the case, they were not in the advisor as portfolio manager program in which he used them.
3. Vet the products and processes you’ll be using.
On a number of occasions, I’ve set up initial calls with lending or insurance product specialists for advisors prior to arranging calls or meetings with branch managers. If a new firm’s platform in these areas was not satisfactory, then there was no point in these advisors even considering those firms.
It’s also a best practice to test drive the prospective firm’s technology. Make a list of the ten most frequent things that you do every day on your computer and then test drive the prospective firm’s workstation. You’ll also want to chat with the transition team to ensure you understand their process and that their track record inspires confidence.
4. Get multiple offers.
Most advisors prefer to have a few offers to evaluate.
If back-end bonuses are part of the package, you’ll need to assess if they are truly attainable. If you have $200 million in assets under management, how likely are you to grow that number by 50% over a three-year period? If that’s not highly likely, then that potential bonus is not something that you should factor into your decision.
My own view is that unless you are an up-and-coming rookie, promises of potential bonuses that are contingent upon delivering more than 120% of on-board AUM or gross production should be disregarded.
Sizing up a proposed deal based on how much you can realistically expect to earn is the better way to go. What’s your no-brainer level of deliverability?
