By Wendy Leung
As the dust is starting to settle from the COVID crisis, 5 key principles have remained intact, leaving behind good news for those considering change
2020 was off to a great start for advisors seeking new opportunities. Who could dispute the expansion of the landscape, advances in technology and widespread access to resources once only available at wirehouses? It seemed clear that advisors had more choice and opportunity than ever before.
Then COVID-19 hit—changing the course of the year and of our world.
But as the dust is settling, advisors have come to realize there’s one thing that hasn’t changed: That is, the opportunities for advisors considering change have not diminished.
In fact, here are 5 reasons why 2020 is still expected to be a great year for advisors considering change.
- A Competitive Recruiting Environment
The competition for top talent is keeping 300%+ recruiting deals in place despite the market turmoil caused by the COVID–19 crisis. The wirehouses (with the exception of Merrill Lynch) are back at the table with an increased commitment to recruiting and are competing head-on with regional and boutique firms for advisors who want a full-service employee model, strong brand and the opportunity to monetize in the short-term.
Add to that an expansive universe of high-quality independent options competing for the attention of entrepreneurial advisors – those seeking ownership and control, enhanced long-term economics and maximum enterprise value – and you have a competitive recruiting situation that puts advisors squarely in the driver’s seat.
Plus, firms have proven that they can successfully support virtual transitions, as evidenced by the pace at which regional and wirehouse firms have been recruiting. In Q2, with the COVID crisis in full swing, Raymond James, Ameriprise and RBC have been the most active regional firm recruiters with 33, 18 and 12 reported moves, respectively. And the wirehouses similarly are not letting the pandemic slow things down, with Wells Fargo reporting 18 moves, Morgan Stanley, 13, and UBS 9. The top 5 recruiting winners of the year have collectively brought on $44.3B in AUM YTD, not including the recent win this past Friday by Rockefeller of a UBS team in Houston with $500MM in AUM.
- A Levelled W2 Playing Field
For advisors who prefer a full-service firm, but want a more nimble, flexible environment with an advisor-focused culture, regional firms have become the destination of choice. In the past, advisors questioned whether regionals could compete with the wirehouses in terms of platform, technology and resources. Today, these firms have proven they can: By investing in technology and expanding investment platforms they have levelled the playing field and in effect commoditized these resources. In fact, wirehouse advisors who perform due diligence on a regional firm are often surprised to find that their wirehouse no longer holds the competitive edge.
In addition to regionals, high-end boutiques – like Rockefeller Capital Management and First Republic Private Wealth Management – have also had tremendous recruiting success, winning corner-office wirehouse teams with truly differentiated platforms built to service HNW and UHNW clients, an entrepreneurial culture and more open “independent style” platforms.
- Strong Client Relationships = High Asset Portability
Advisors have shared that not only are they increasing the frequency of client communications throughout the COVID-19 crisis, but they are also having broader, more personal client conversations—going beyond investments to health, family, jobs and overall well-being. These conversations are reinforcing and deepening client bonds like never before.
The strength of these client relationships, along with the experience of having successfully navigated clients through the current crisis, is making advisors very confident in the portability of their businesses—and these “battle tested” client bonds are expected to translate into high asset portability when advisors make a change.
- Early Retirements
The stress of managing through a tough market and a global health crisis is causing many advisors who are close to retirement to step up their plans—creating a windfall of succession and acquisition opportunities.
Acquiring a book can be a game changer, catapulting an advisor’s business to a level that would have taken years to achieve by bringing on one new account at a time. Yet not all acquisitions are created equal: There are important considerations to weigh. For instance, wirehouse retirement plans have clauses that bind the acquirer and the acquired book to the firm for anywhere between 5 and 7 years. As such, it is important for the acquirer to feel highly confident in the future of their firm—since they are, in effect, recommitting the business for the length of the agreement.
Acquiring an independent business involves other considerations, including valuation, assessing the stickiness of client relationships and the fair sharing of deal risk. The key to a successful acquisition is to carefully analyze all elements of the transaction, weigh the positives and negatives, and determine, on par, if the acquisition truly helps to achieve future goals. Expert guidance can help advisors navigate through the evaluation, ensuring that the right questions are asked and answered.
- The Expansion of the Independent Landscape
The independent space has matured dramatically over the last several years, providing those who are looking to build independent enterprises the ability to access best-in-class technology, investment platforms, sophisticated PE, alternatives, research and lending—often besting what’s available in the brokerage space.
Additionally, a cottage industry of service providers has emerged. For those who are looking to have much of the heavy-lift of starting an independent business taken off their hands, firms like Dynasty Financial Partners, Sanctuary Wealth and LPL Strategic Wealth Services offer bundled suites of services, which include everything from turn-keying the launch of the independent business, providing ongoing support for compliance, marketing, technology, investments, plus billing and practice management. And for those advisors who are seeking support only for certain aspects of their businesses, there are a wide range of specialty consultants who provide a la carte services.
The bottom line is that for advisors seeking greater freedom and flexibility, the options are plentiful, the capabilities and support infrastructure are strong, and the bridge to independence has been built and tested.
For those in the wealth management space, the COVID crisis tested both individual advisors and the firms they worked for in terms of creativity, flexibility and shear tenacity—creating a new lens through which advisors can view the future.
And while the impact of the crisis on our lives is yet to be fully recognized, there is some good news: Wealth management is weathering the storm, the recruiting environment is strong and the opportunities that we started this year off with are still there for those who are exploring. Advisors need not settle for “good enough”—with the abundance of options, it’s entirely possible to get much closer to “ideal.”