A step-by-step framework for evaluation of the when, how, and what of strategic due diligence

It’s a sad story, really—one you’ve heard before, and if you speak with enough advisors, you’re likely to hear again. It goes something like this: An advisor is unhappy at their current firm, but for one reason or another they feel stuck, inertia takes over, or they get overwhelmed by the prospect of a move, so they stay put.

Ultimately, they dread coming to work each morning, their clients are perhaps not as well served as they otherwise might be, their support staff is miserable…and so on and so forth.

How does it come to this?

To many advisors, the sheer thought of conducting due diligence – let alone even consider the heavy lift involved in a move – is one filled with dread. And that’s totally understandable because, as a whole, due diligence can be downright daunting.

But by performing it with forethought and taking it step-by-step, the process becomes far more manageable.

In decades of working with advisors, we’ve identified a simple framework for due diligence based on strategic and focused intent—thereby empowering advisors to make informed decisions and to limit the feeling of overwhelm.

The calculus of a move typically comes down to three decisions, made in this order:

If you are going to move.

Where you are going to move to.

When you are going to move.

To move or not to move, that is the question.

Decision 1: Are you unhappy enough or curious enough to explore options and consider a move?

Conducting strategic diligence does not mean that you will ultimately make a move. It simply means that you are getting educated on what the landscape looks like.

It also does not mean haphazardly taking meetings with any firm in your Rolodex.

So, what does it entail? Step 1 is to get educated on the landscape of possibilities and do some real introspection about how you want to live your business life in the future. For some, this simply means doing homework on their own (“armchair exploration”) or with guidance from an experienced recruiter. For others, diving right in to taking meetings with various firms is the right approach.

In both cases, the diligence process continues until one of two inflection points are reached: Either you find something “better enough” to continue down the path, or you halt the process and recommit to your current firm knowing it’s the best place for you at present.

Another benefit of getting educated is creating a “Plan B”. We live in a world of heightened and heavy-handed compliance, and ever-changing management mandates at the big firms, so advisors take comfort in having a backup plan at the ready.

Location. Location. Location.

Now that you’ve done some soul-searching and determined that there is enough pain or meat on the bone elsewhere to justify the hassle of a move, it’s time to decide where you’re going to go. That doesn’t necessarily mean selecting one firm, but rather a type of firm that feels like the “right” fit.

Decision 2: What – and where – do you want to be when you grow up?

Answering these questions will help guide your thought process:

• How much transition money do you need/want?
• How important is a name brand?
• What is your biggest frustration that a move must solve for?
• What facets of the business do you enjoy/want to keep control over?
• What does your current firm do really well that you would like to replicate?
• Are you entrepreneurial, and does the notion of independence appeal to you?
• If so, how entrepreneurial? How much support do you need?

The questions above are not the be-all, end-all. They are intended as a framework to steer your thinking. For example, if maximizing transition money is critical, independent options are perhaps not the right fit. If you are frustrated with the lack of control and management bureaucracy, and desire more freedom and flexibility, then it makes sense to look outside of the traditional wirehouse space.

Timing is everything.

Once you’ve decided that you’re going to move and the model or type of firm you are going to move to, it all comes down to timing.

Decision 3: When do you pull the ripcord?

This decision boils down to personal preference to some extent, but there does appear to be a happy medium. For most advisors, you want enough time to be thoughtful, thorough, and well-prepared for the big day, but not so much time that you feel like a person floating between islands for an extended period.

For example, it can be hard to prospect for new clients once you decide to make a move since it might feel disingenuous. Plus, you are likely to be excited about the new option and prolonging the move will mean keeping the secret that much longer—which can be extremely difficult.

While there is no right answer, a well-planned move typically takes a minimum of 6 weeks from the time a decision is made, barring extenuating circumstances.

Advisors who might otherwise be better served elsewhere are stuck only if they choose to be. But the reality is that inertia is a powerful force.

If anything, you should feel empowered by the realities of the modern wealth management landscape: There are better, more plentiful, and more robust options out there that solve for nearly everything an advisor might be looking for in a new home.

In closing, consider this analogy: You get married and buy a house. It’s a great house in a happening neighborhood and a terrific place to start the new chapter of your life. But then some years pass, and you have a few kids. The house that once served you well may no longer serve you best—that is, you need a home with more space in a town with a great school district.

Your needs have evolved as you have. Is it best to stay put and “make it work”? Or would you take the time to investigate what else is out there?

As seen on WealthManagement.com…