April 14, 2023
Mindy Diamond Quoted
by Steve Garmhausen
Investors often seek out large brokerage firms because they like having the stability of a big company. What many people may not realize is that top advisors at marquee firms like Morgan Stanley, Merrill Lynch, Wells Fargo, and UBS typically work in teams, which come in many different flavors.
The differences go on and on. In practice, successful big Wall Street teams are often distinct businesses within businesses. “They may have Morgan Stanley or Merrill Lynch on their business card, but they run very independently,” says Mindy Diamond, CEO of Diamond Consultants, an advisor recruiting firm.
In other words, HLM’s investment philosophy is about earning the returns necessary to achieve goals with the least risk possible. Other teams tout their ability to deliver above-market returns, and there’s a big investor constituency for both approaches. Investors should be very clear on this point with any advisor they consider hiring.
A related question for a major brokerage team you’re considering hiring: Are there limitations in the investment strategies you offer based on what your firm allows you to do? For instance, says Diamond, teams might leave their parent companies to be able to offer a broader menu of alternative investments than the firm allows. Most big firms don’t allow clients to own cryptocurrencies in their accounts.
Given the business-within-a-business character of many teams, a good question to ask is whether a team intends to leave its parent company, says Diamond. “The more a team runs independently as a business, the more likely that team could be to leave at some point and become independent or join another wirehouse,” she says. “That’s something every client should ask their advisors about, and I don’t know that most people do.”
Service model. Determining the level of client service that you can expect can be tricky. Ask the advisor you’re considering hiring, “Will I be working directly with you, or will I be assigned to a junior person who lacks your experience?”
Every advisory practice describes itself with terms like “client centric,” but “the extent to which each team really lives and breathes that certainly differs,” says Diamond. “Some advisors are more focused on bringing in assets, and others are more focused on client service and nurturing relationships.”
