A Wirehouse Team Moves to a Regional Firm

Diamond Consultants began speaking with “James”, a wirehouse advisor in a southeastern city, several years ago. He had been a partner and manager at a regional firm that was ultimately acquired by a wirehouse. For the past decade, he was partnered with “Nancy”, a CFP several years his junior. Together, the team was generating around $1.5 million in annual production. While they would never have chosen to move to a wirehouse on their own, given their aversion to additional layers of management and red tape, they felt their firm was the best wealth management firm for them and wanted to try to make it work.

As the financial industry landscape continued to change, James and Nancy wanted to ensure they were still in the best place for their clients and the growth of their business. We talked about the market, changes in the landscape, different models of independence, and regional firms. Then a new CEO took the helm of their firm. While James felt somewhat encouraged by the new CEO’s strong reputation as a firm builder, in short order, he felt the “background noise” in the form of negative press about the firm was getting louder, and they were cutting back on support and recruiting. All of this made the team uneasy about the firm’s financial stability. Communicating with the back office was also becoming more cumbersome, causing a problem for their clients. Moreover, the firm was dedicating marketing and other resources to larger advisors and teams. As a last straw of sorts, a key referral source set the team up with a multi-million dollar prospect who liked the team, but ultimately determined they would not do business with them due to the firm’s negative press and uncertain future. With the ability to grow their business now being hampered, James and Nancy knew they needed to aggressively explore alternative options.

Unlike last time when their firm was acquired, they were determined that this time, they would be the ones to choose what firm they joined.

The Plan

Based on the team’s hot buttons and limited local alternatives we discussed other wirehouses, different forms of independence and the small firm feel of a local regional firm in order to help them clarify what was most important to them and narrow their focus. While wirehouses offered the largest transition deals[1] for a team of James’ size, the deal size was not driving the move, and they were now determined to get away from the wirehouse world.

The Meetings

James and Nancy met with the local regional firm’s manager multiple times, and went on a home office visit. Once there, the team felt a sense of belonging. According to James, “There was a sense of professional camaraderie and optimism. Everyone seemed happy; we felt much the same way we did at our original regional firm. It was that familiar culture that we had hoped to find again.” They were pleased that the firm was a public company for transparency purposes, and owned a small bank in case they needed any lending capabilities for their clients. A big plus for the team was that the firm had investment management at its core with no competing priorities between investment and banking. They also liked that most of the firm’s leadership had been advisors at some point so they knew what the team liked and needed, and seemed dedicated to their growth.

The key differentiators for James and Nancy – Why this regional firm?

• The strong culture and reputation for being stable, and client and advisor-centric. They knew that their clients’ assets would be safe, and that the firm name would help prospecting efforts so they could recapture the growth trajectory that they once had
• The firm was not bank owned and so they wouldn’t have to push particular products or services. The brokerage business was the primary contributor to the firm’s bottom line
• Access to cutting-edge technology that could be tailored to their business, and their high net worth clients would be served well
• James could feel proud to retire from this firm, and also feel secure that Nancy and their clients would be well taken care of.

The Wrap-Up

James and Nancy left their firm to join the Private Client Group of the regional firm. Since the team had operated in the same area for the last 20 years and were well established in the community, the firm agreed to open an office for them. While the deal they received from the regional firm was less than what the bigger firms offered, the many upsides far outweighed that particular downside. James and Nancy followed the broker protocol and quickly brought about 90% of their assets to the new firm. According to James, it was easy to talk to his clients about their decision to move and why the new firm was the best place for them. While it was somewhat challenging to convert certain proprietary products from their old firm to the new one, the firm’s dedicated transition team helped them get it done. “Our new firm delivered on everything they said they would,” James said. “We just celebrated our one year anniversary here and we have two more advisors in this office. Nancy and I feel proud to represent this firm and feel like we are part of something very special.”

The Lesson

As the landscape has expanded, more financial advisors than ever are beginning to think about alternatives beyond the wirehouses. As such, in many cases the economics are not the main or only driver. Taking time to clarify what’s most important to you before going to meetings will save valuable time and energy and ensure the right decision.

Notes

[1] At the time, the transition packages being offered by the wirehouses could be as high as 350%. They have since come down from this high-level mark.

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