A season of self-reflection has descended on financial advisors, as retention packages for top producers are expiring and the industry landscape continues to evolve. In this environment, advisors are asking themselves questions like: What are my goals, and how have they changed? How can I step up the level of support my clients receive? Not surprisingly, these advisors also have questions about their firm’s ability to remediate things that frustrate them.
Advisors assessing their satisfaction with their current employer tend to focus on three issues: bureaucracy, client service and compensation. Regarding pay, advisors want to be fairly rewarded for their efforts through cash or deferred compensation. On client service, advisors want the flexibility to select the types of businesses and individual account sizes that make the most practical sense for their practices. Finally, advisors’ opinions on bureaucracy come down to whether they feel their employer lets them do their jobs efficiently.
Below are some additional questions advisors might ask themselves to help determine whether their firm, in its current state, can satisfy their own goals and their clients’:
- Can I live with the changes my firm has put in place? If a brokerage’s home office has begun limiting advisors to specific types of clients, advisors must ask about the effects of the change on their overall business. Then there’s the issue of advisors’ values clashing with the firm’s. We have seen advisors cringe at household minimums that prevent them from working with new clients with investable assets of less than $250,000. In these situations, advisors must ask whether it is worth it to give up on clients and prospects who complement their value system.
- Is my firm asking me to do things that are unreasonable and creating unnecessary inefficiencies? If a firm’s lack of support is interfering with advisors’ day-to-day business practices, that’s a problem. For example, some advisors generate much of their new business via seminars and marketing events. However, the amount of time and effort it takes to get one of these events approved may be unreasonable at certain firms. As a result of the bureaucracy, the advisor must absorb a good deal of the costs for these initiatives, a draining practice that can foster distrust of the employer.
- How much in hard dollars will a firm’s compensation change cost me? When advisors feel boxed in by their employer, they have more incentive to weigh the positive things that keep them at their firm against the benefits offered by competitors. Changing compensation formulas increase this incentive. An advisor’s future business outlook can influence whether a move occurs or not. For example, an advisor unhappy about losing $300,000 annually in cash because of a compensation change is likely to stay with the firm nonetheless, if she has an enormous pipeline of activity. However, an advisor with a cloudier future may be more likely to leave in such circumstances.
In all three of these questions, we are talking about a loss of control, which no one likes. Still, despite legitimate frustrations, most advisors don’t wind up changing firms — because the inevitable calculus that weighs the value-add of a potential move against the ease of staying put favors the status quo. Meanwhile, a move is disruptive to clients and to momentum, so an advisor needs to be darn sure that changing employers will actually move the needle enough for everyone concerned. If that doesn’t seem likely, acceptance of what’s less than perfect is usually the best answer — at least for the time being.