Many advisors feel that changing firms or models is just too risky. But what they may not realize is that there’s also a risk to staying put.
There’s certainly some risk inherent in any move. There are the financial implications of leaving chips on the table or resetting the clock on a new note, the prospect that client portability will not meet expectations, the disruption of momentum, and even the legal concerns around employment agreements and Protocol compliance.
Yet still, advisors move every day undeterred by the potential risks because they trust that their thorough due diligence and careful planning will result in a new home that will allow them to grow faster and better serve clients.
But what of those “lifers” who stay put, concerned that the risks of making a move are greater than the benefits of leveraging the long-term relationships they’ve built at their firms?
In speaking with “David,” a $4mm wirehouse advisor, he shared that he was “comfortable enough” having logged nearly 3 decades at his firm. It’s not lost on him that it’s a very different place than it was some 30 years ago and many of his respected colleagues have moved elsewhere. David acknowledges the frustrations and limitations that are part of working for a big firm, but he feels that changing jerseys isn’t really “worth the risk.”
Because for now, it’s working for him. David has a direct line to the top, he knows just who to call when he needs an exception, he’s often a recipient of referrals from the firm, and he’s growing exponentially.
If David had a crystal ball and he knew that the next decade would look much like the last in terms of the freedom and control he has, he would never leave. And who could argue that?
But things do have a way of changing—and he worries about that more and more every day.
A False Sense of Security
While many may find that there’s greater comfort and familiarity in working with the “devil you know,” it’s often a false sense of security. The real issue is in not knowing what may be coming down the pike.
The reality is that there are genuine risks in anything you do. And even the choice to stay the course has a certain level of risk attached, such as:
- Advisors increasingly lose control over their business lives.
As big firms have become more focused on mitigating their risk and streamlining businesses, there is a battle for control that many advisors feel they are losing. Managing to the lowest common denominator, changing compensation, more bureaucracy, and increasing pressure to cross-sell bank products are examples of how big firms are asserting their power over advisors and their businesses.
The risk: The loss of agency over client service, compensation, and business growth.
- Advisors are prohibited from optimally serving their clients’ changing needs.
The combination of an evolved client mindset that’s demanding “more” from advisors and the expanding waterfall of possibilities that offers advisors an abundance of options to build their businesses has created a new level of competition in the landscape. As such, if advisors are restricted from “shopping the Street” for best-in-class products and services, they are left with a choice between honoring the wishes of their clients or the mandates of their firms. Additionally, if an advisor learns of a better way to service clients, they may risk losing credibility and confidence when pitching for new business or seeking to retain existing relationships.
The risk: The loss of clients due to an inability to remain competitive.
- Advisors’ businesses are devalued.
Advisors are currently enjoying what we call a seller’s market, in which opportunities are plentiful and businesses are valued at high water marks (whether through a forgivable note from a traditional W-2 firm, via their firm’s retire in place program, or a sale on the open market to an independent firm). But what happens if firms increase restrictions, further limiting advisors’ abilities to do their best work? Or what if more firms leave the Protocol for Broker Recruiting, strengthen their employment contracts via provisions in sunset programs, or seek to further ingrain themselves in advisor’s businesses making portability more of a challenge? It will inevitably mean that more advisors hit the streets and supply will start to outpace demand. This can cause a shift from a seller’s market to a buyer’s market—and diminish the value of the advisors and their businesses, along with the price a firm will be willing to pay for them.
The risk: The loss of business value, portability, and optionality.
- Advisors could be missing out on something “better.”
If the choice to stay put is rooted in the knowledge that an advisor’s firm is well-aligned with one’s vision and goals – that is, the best place to support growth, creatively serve clients and live one’s best business life – then it is indeed right to stay put. But if it is inertia driving the bus, led by the assumption that there is no better option, the result is likely to be the greatest risk of all: Lost opportunity.
The risk: The opportunity cost.
For advisors like David, the question becomes this: Do you keep your fingers crossed and hope that the status quo will continue to serve you, or do you recognize that change is inevitable and get out ahead of it before the floodgates open?
The truth is, you shouldn’t consider changing firms or models unless you are certain that it will move the needle substantially enough to warrant the risk and hassle. Likewise, it’s equally important to be aware that staying put is not guaranteed to be risk-free.
So, if there is a voice that is telling you to at the very least explore, now may be the best time to listen. Because one of the most time-sensitive risks of all is missing out on the seller’s market: It won’t last forever.
As seen on Forbes.com…
