Redefining Regional Firms: It’s More About Culture Than Geography
Regionals have emerged as the new hot spot for advisors looking for flexibility within the security of an employee-based model
Firms like RBC and Raymond James are experiencing such recruiting success nationally that they are redefining what it means to be a “regional” firm. In the past, these firms were characterized most notably by a small geographic footprint. But now the term has come to represent a specific culture that is appealing to scores of advisors across the country who are looking for options outside of the wirehouse world.
What is the cultural difference?
While culture can be an elusive term to define, when it comes to regional firms, we can capture it in these 3 key concepts:
1. Advisor-centric
The smaller footprint of these firms has enabled them to create an environment that is more focused on the needs of the advisor. The firm is more likely to see its role as giving advisors the support they need in order to serve their clients while respecting the advisor’s “ownership” over the client relationship. Overall the relationship between management and advisors is more collaborative and less adversarial, particularly when it comes to oversight. And generally speaking, regional firms offer more stable, straightforward compensation plans that are subject to less frequent changes, often the bane of a wirehouse advisor’s existence.
2. Less bureaucratic
Fewer layers of management combined with a smaller workforce mean that there is far less of a feeling that policy is defined by the lowest common denominator. Advisors have greater opportunity for direct access to senior leadership, giving them more of a voice in the direction of the firm. Top management at the firms have had less turnover, creating continuity and an environment in which advisors have a higher level of certainty about what the firm and their own lives will look like in the future.
3. Greater flexibility
The smaller size, flatter management structure and advisor ownership of business all create an environment that encourages greater flexibility, offering a solid alternative to those who are not quite ready for independence. While finding ways to be flexible, regional firms are nonetheless conservative and have consistently avoided the issues that create headline risk for other types of firms. Advisors describe a more cooperative relationship with back office and management personnel whose job it is to find solutions that support an advisor’s efforts with a high level of responsiveness. Many of these firms will consider creating new or satellite offices where they do not currently have a presence which can be very compelling for teams who would like to be a beachhead in a new market and allow them to more easily differentiate their “story” to clients and prospects.
Do they compete in terms of platform and technology?
Today’s regional firms are not your father’s regionals. For the most part, they have caught up – and in some cases even surpassed – what the wirehouses have achieved in terms of technology and platform, once again confirming that platform has become much more of a commodity over the past 5+ years.
But regionals do vary in terms of access to certain capabilities, such as credit and lending, alternatives, trusts and capital markets. As in all exploration, platform and other resources need to be vetted based on an advisor’s specific needs and goals, because understanding how the business maps over to a new firm is a critical part of any due diligence process.
What is the impact of less brand recognition?
While a particular regional firm’s brand may be less well-known to clients in certain parts of the country than in others, advisors who prefer to rely less on the “big name” in marketing themselves and more on their personal brand find their value proposition very attractive, and much in line with the thinking behind a move to independence. Advisors may in fact rely on the firm’s absence from the headlines and lack of negative publicity as more important than immediate name recognition. Ultimately, with regional firms advisors need to be more comfortable focusing on their personal brand and the substance behind their firm.
Can regional firms retain their unique flavor as they continue to grow?
Just as regional firms are no longer defined by their geography, they are also not solely a product of their smaller size. As strongly committed to growth via recruiting experienced advisors as they are, the intention is still not to grow to compete in size with the likes of Morgan Stanley and Merrill Lynch. Furthermore, they do not suffer significant regrettable attrition, so their advisor ranks remain quite stable. Along with consistent profitability, regionals have the scale to ensure ongoing financial stability and the necessary reinvestment in platform and technology to stay relevant and competitive.
There is no one perfect model or solution that exists to meet the needs of every advisor, but today’s regional firms emerged out of the financial crisis with an updated toolbox, a renewed commitment to growth and a fresh take on how to support advisors who still value the advantages of being an employee and having a firm around them. So don’t let the moniker “regional” distract you from quality; they are a compelling story and have secured their place in an evolving industry landscape.
