• Home: Leading Financial Advisor Recruiting Firm
  • About Us
    • Meet the Team
    • Testimonials
    • Case Studies
    • Representative Deals
  • Services
    • For Financial Advisors
    • For Independent Business Owners
  • FAQs
  • Articles
  • Podcast
    • Industry Update
    • Independence 101 Series
  • In the News
    • Moves in the News
  • Tools for Advisors
    • Advisor Transition Report 2022 – NEW!
    • Merrill Information Hub
    • UBS Information Hub
  • Contact Us
  • Subscribe for Updates

Questions? Call us: 908-879-1002

Contact us...
Diamond Consultants: Financial Advisor Recruiting FirmDiamond Consultants: Financial Advisor Recruiting Firm
  • Home
  • About
    • Meet the Team
      • Mindy Diamond
      • Louis Diamond
      • Howard Diamond
      • Jason Diamond
      • Barbara Herman
      • Deborah Aronson
      • Wendy Leung
      • Cathy Nichols
      • Debbie Wallen
      • Allison Brunwasser
      • Joshua Tomolak
      • Shelley Muzio
      • Caryl Felicetta
      • Donna Riopel
      • Kelly Griffiths
    • Testimonials
    • Case Studies
    • Representative Deals
  • Services
    • For Financial Advisors
    • For Independent Business Owners
      • Sell-Side M&A Advisory
      • Consulting
  • FAQs
  • Articles
    • Subscribe for Updates
  • Podcast
    • Industry Update
    • Independence 101 Series
    • Subscribe for Updates
  • In the News
    • Moves in the News
    • Transition Announcements
  • Tools For Advisors
    • NEW – Diamond Consultants Advisor Transition Report 2022
    • Merrill Information Hub
    • UBS Information Hub
    • Other Tools
    • Subscribe to e-Newsletter

The Post-DOL World: Its Likely Impact on Recruiting Deals

The Post-DOL World: Its Likely Impact on Recruiting Deals

The Post-DOL World: Its Likely Impact on Recruiting Deals

Posted by Mindy Diamond

Advisors and recruiters alike tread cautiously through a new land filled with uncertainty when it comes to transition packages

Advisors have long held on to the certainty that when, and if, they were ready to change jerseys, they could do so and be paid the record-level deals that exist today. Everyone thought that we recruiters were crying wolf when we said, year after year, that at some point the gravy train would end and if you had a move in you, we strongly suggested making it sooner rather than later. While some advisors heeded our warnings, most believed that the rivers of wealth would never dry and that deals would just keep rising.

I can’t blame any advisor who chose to roll the dice and stay put—after all, in most cases the decision to do so was based on legitimate factors like waiting for a chunk of deferred comp to vest, a partner to retire, a large client’s estate to settle, or just plain old being certain that the current firm was the very best place to serve clients and grow.

But, here we are at the threshold of a whole new world – a post-DOL world – and we are just beginning to witness the impact it will bring. Merrill has already announced the elimination of commission-based retail retirement accounts, while the other big firms have signaled intent to use the Best Interest Client Exemption (BICE), but have not publicly given specifics yet. And, while we have no particulars yet, the next thing to be addressed is transition money. It is pretty clear that the DOL will force the big firms to eliminate any incentives to grow revenue—what is referred to as the “revenue back end component” of deals. Their reasoning is that the incentive has the potential to create a conflict of interest which goes against the very grain of the fiduciary mindset.

So, what do we know? There is some writing on the wall that we need to consider:

  • While the DOL Fiduciary Rule doesn’t go into effect until April of 2017, we have every reason to believe that the firms will implement any changes long before then.
  • We don’t know that a change will necessarily mean lower deals; we just know that while the firms are deep in the weeds trying to interpret the 1,000 page DOL ruling, everything is on the table and up for grabs.
  • There is no reason to believe that deals will go away altogether or that there won’t be robust incentives offered to quality advisors—we just need to wait and see if they will continue to be as “user friendly” as they are today and how firms will creatively manage in this new world.
  • We know that deals are at high water marks currently and it is very unlikely that they will get any better than they are now. We also know that firms are loath to put any more money at risk in a deal – i.e., the upfront component – so if the back end revenue bonuses are eliminated, they will need to figure out a different and perhaps more creative way to incent portability and growth.
  • The potential impact won’t only be on deal structure but also on the valuation of one’s business —for example, there’s currently some chatter about deals only being offered on fee based business.
  • The big firms know that if they mess with structure too much and make deals significantly less compelling, more and more advisors will go independent—or some version of it. To be sure, as the landscape has expanded, there are evermore real options outside the big firm world that allow advisors to monetize their businesses, build equity, and gain freedom, flexibility and control.

Are the good ol’ days over?

There is still a window open between now and year-end (or at least through mid-December when FINRA closes) for advisors to monetize their businesses, taking advantage of current deal structure. While performing all the necessary due diligence and making a move in under 2 months can be a challenge, it’s not impossible for those who have already begun the exploration process. (Note: We caution that no move should be made without thoughtful and thorough due diligence.)

That said, especially with respect to top of the food chain advisors, we believe verily that deals need to remain competitive in order to ensure that recruiting flourishes. At the end of the day, deals may not look exactly as they do today, but we will wait and see how things shake out. As they say, when one door closes, another one opens—however it’s what’s behind that door that still remains to be seen.

You may also be interested in...

Share
0

About Mindy Diamond

CEO – By counseling advisors on how to ask the right questions and “dig deep”, she helps them look at all of the opportunities available to find the one that allows them to reach their full potential. That is, to best serve their clients and live a life that is in sync with their own beliefs and values. Learn more...

    Subscribe for Updates

    Get updated by email when a new article is added.


    Listen. Here. Now

    Recent News & Articles

    • Financing Independence: A Lender’s Perspective on Breakaway Transitions, M&A and Succession
    • Winners and Losers: The Year that Was in the Wealth Management Recruiting Space
    • Recruiters Reveal Their Secrets On Cultivating A Robust Advisor Pipeline
    • What Really Makes Financial Advisors Happy?
    • The big questions facing SVB advisors and their clients
    Schedule a Complimentary Consultation
    We're available to answer your questions. Contact us

    Connect with us

    Search

    © 2023 · Diamond Financial Consultants, LLC t/a Diamond Consultants. All rights reserved.*

    • Leading Financial Advisor Recruiting Firm:
    • About
    • Services
    • FAQs
    • Articles
    • Podcast
    • News/Media
    • Tools/Resources
    • Contact
    • Our Locations
    • Privacy Policy
    • Site Map