Making the Move from Wirehouse to Wirehouse Isn’t Necessarily “More of the Same” as One Advisor Finds Out

“JoAnne” has been a lifer at her firm; second generation, in fact. Her father, Stan, started practicing as a financial advisor some 60 years ago, spent almost 40 years in the same seat and retired about 8 years ago. JoAnne joined him 5 years post-college after she had gotten public accounting out of her system. At that time, Stan’s old-fashioned, commission-based business managed money for 100 families with a total of just north of $100mm in assets. Stan taught JoAnne everything she needed to know about being a good financial advisor and nurturing relationships, and she worked hard to emulate him in every way. Today, JoAnne and her team (now including a junior partner and 3 support staff) manage approximately $1B in assets, with most clients in the $5–10mm range, and generate annual revenue just shy of $7mm.

As Stan was heading toward retirement, JoAnne began to pay closer attention to how the business was being run, how it could grow more efficiently, and how clients were being served.  All new business brought in was done so on a fee basis, her average client size increased, and she began to put some solid practice management ideas into place. By the time Stan was ready to call it quits, he felt entirely confident that his heir apparent would capably succeed him and protect his legacy, carrying it forward into the next generation.

JoAnne always believed that she, like her dad, would retire from her firm. She was fiercely loyal to it, so grateful for the training and support given to her in her early years and for the ability both she and Stan had to earn such wonderful livings. Even as she watched way too many of her well-respected colleagues jump ship over the years and accept outsized transition packages*, she believed verily that her clients were best served by her staying put. And, so, despite many imperfections and ever-increasing bureaucracy, JoAnne was content to stay the course.

Until…

Fast forward to 2 months ago when the 5th branch manager in as many years was recruited to a competitor, the loan JoAnne needed to get done for her biggest client was declined, and the likelihood of her being able to continue to grow the European segment of the business was becoming slim. JoAnne will tell you now that the handwriting had been on the proverbial wall for a long time, pointing to the fact that this extraordinary business she built may no longer have best been served by her firm, but she just couldn’t see it—or at least acknowledge it. I think the biggest emotional hurdle for her was a feeling of disloyalty to her father; to even think about changing jerseys seemed like a betrayal to the legacy he left her. As with most emotionally charged scenarios, JoAnne woke up one morning with a sense of great clarity: It was time to put on her “big girl shoes” and make a decision about what was best for her clients and for the long-term health of the business—and it simply was not to remain where she was.

JoAnne and I had a longstanding relationship. I made a cold call to her not long after she joined Stan; she told me politely that she was a rookie and that her dad loved their firm and the team had no thoughts of going elsewhere. We have stayed in touch twice a year for the past 15 years or so, each time JoAnne telling me that she was my least likely prospect. Mournfully, she reached out to me the morning of her epiphany and said that she felt it was time to consider other options. We talked at length about what her business looked like, what her clients’ needs were, what her personal and professional goals were, and what was presently thwarting her. The more we talked, the less sad JoAnne sounded.

Considerations

JoAnne is an outstanding advisor but she had little awareness of how the industry landscape had changed since she started in the business, the kind of transition money that was being offered, and what she could expect elsewhere in terms of support for growth. These became the threshold issues for JoAnne to consider:

• Where do I want to take the business?
• What sort of support or additional resources do I need in order to achieve my goals?
• How entrepreneurial am I? Do I see myself as a business owner?
• How do I want to spend my time?
• How important is gaining more freedom, flexibility and control?
• Are the problems I am dealing with just because of my firm or are they overall industry issues? Put another way, if I were to go elsewhere, would I be just as limited?
• What are my economic needs? How many years do I have left to work, how important is upfront money, and how long-term focused am I willing to be?

The Process

While perhaps in a perfect world where money didn’t matter and JoAnne was 10 years younger, she might have considered some version of independence as utopia, we agreed that she is a “big-firm girl.” She liked the turnkey nature of things, the easy access to top thought leaders and support, the big name brand, and the idea of being paid a whole lot of money to de-risk a move—all things that only a big firm could provide. Yet she was well aware that a jump from one wirehouse to another was not likely to move the needle a whole lot in terms of bureaucracy and overall control. But, there is leverage in being recruited and so a move would solve for the ability to serve her clients with more freedom, to be given an additional support staff at the new firm’s expense, to prospect for European business, and to be paid a vast sum of money as incentive to join. (While personal financial gain was not at all the motivation behind JoAnne’s move, she was clear that if she were going to endure the hassle of transition, she expected to be paid handsomely for her efforts.)

To satisfy all curiosity, we came up with a short list of options JoAnne should consider. That list included:

• The three other wirehouse firms: Would a move to another big firm be “better enough?”
• Two regional firms: Understanding that the transition packages being offered by them at the time would be far less than the wirehouses would offer, the possibility of joining a firm with superior culture – and allowing more flexibility and freedom – was appealing.
• Quasi-independence: Why had so many of her colleagues moved to this model? Would it allow her to better service her clients? Could she grow faster?
• Focus Financial Partners: Could it be appealing to have a capital and strategic partner, and ultimately be independent? What would this mean in terms of take-home economics, building a legacy that she could pass on to her own children, adding inorganic growth to the mix, and ultimately having the ability to serve clients with more creativity and freedom?

The exploration process typically takes months, but JoAnne was insistent that she didn’t want it to distract her from doing her best work and so she opted to accelerate. Within 6 weeks time, she moved through the diligence process, easily and quickly eliminating the ones that were obviously not a fit.

The Wrap-Up

Guilty, sad and regretful turned to excitement, enthusiasm, and “I can’t wait to make this move” in fairly short order. JoAnne decided that a move to another wirehouse was most right for her. Much to her surprise, it became apparent that a change would not only help to accelerate her growth and feel like a breath of fresh air, but she discovered some “game changers” including specialized and unique platform capabilities, stronger investment banking, and that she would be working for a long-tenured, fabulous branch manager who would be most vested in her success. Yet, one benefit that stood out was the firm’s robust credit and lending solutions; the ability to serve her clients more completely in that area was a really positive factor.

Largely disabused of the assumption that “all wirehouses are created equal,” the many subtle differences between them could potentially have a very meaningful impact on her business. JoAnne would monetize in a significant way, but also be assured that her clients would be the ultimate beneficiaries of the move.

JoAnne has committed to making the move next month. Understandably, there is some anxiety, but mostly she is thrilled about a fresh start and taking her business to a new level.

The Lesson

Oftentimes, we don’t allow ourselves to acknowledge what isn’t right in our lives because we are fearful of making a change; inertia keeps us stuck. But not seeing things for what they are only works for so long. Accepting our situation for what it is can be powerful and freeing, because it allows us to make proactive decisions about what is in our ultimate best interest. While it often seems easier to stay put – and changing firms is definitely hard work – the long-term reward of change has the potential to far outweigh the short-term hassle and disruption.

Notes

* At the time of JoAnne’s exploration, the transition packages being offered by the wirehouses could be as high as 350%. They have since come down from this high-level mark, and the delta in the deal structures between the wirehouse and regional firms is not as great.

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