Why Advisors Are Not Changing Firms
SuperUser Account posted on October 27, 2010
“Let’s make a deal… How much do you want?... Pick a number.” These are the things you are hearing from the hiring brass at many wealth management firms. These businesses, including wirehouses like Merrill Lynch, are now desperate and willing to give ridiculous deals, but have fewer takers than usual. Things in the recruiting world, from the firm’s perspective, have really slowed down. Hiring managers and internal recruiters have higher goals this year compared to 2009, which stood out as a record recruiting year. All of them are scrambling and desperate for recruits and afraid they won’t hit their goals. Fewer advisors are moving this year, for a number of reasons.
First, there was more movement last year than any year in recent history. All of those individuals that moved are now off the market for a little while. Most of them signed a nine year note and won’t even seriously consider a move for another five years or so. I find that most advisors will look around again before their note has matured, but usually wait until the note is at least half matured. Advisors hate to be tied to a firm and usually start feeling trapped after a few years. They start getting frustrated with things that would not usually bother them – whether it’s the back office losing their paper work or a formal office dress code. After a few years of tolerating it, they throw in the towel and figure they will get a big check from the new firm to pay off the old. Basically they are just swapping contracts.
Second, there are more individuals on retention deals now than any time in history. This is because of all the mergers last year – among the most ever seen. Again, many of these advisors won’t wait for the full term of their contract but will wait at least a few years.
Third, the individuals that decided not to move during the financial crisis just made that decision six to 12 months ago and are not ready to revisit a move yet. Many of these advisors did look around and probably spoke with at least two firms. After some research and several meetings with recruiters, they decided to just stay in the seat for now. It can be emotionally exhausting when you go through the process of speaking with several firms over the course of a couple months. It is disruptive to an advisor’s business and especially their production. While they are tired for now, chances are that they will start looking again sometime next year when they have rested and recovered.
Finally, we are still in a serious time of uncertainty. Advisors are still a little scared to make a move due to concern about whether clients will come with them. This is always a fear, but in a questionable market and economy, it becomes a bigger concern.
An advisor is only as good as his or her book of business. If you move and clients don’t, you are out of business. Of course, this rarely happens but fear is very powerful.
What does all of this mean? It is one heck of a time to take a deal. Because there’s less movement now, most firms are desperate for talent. As a result, advisors who do move can benefit substantially; for example, 130% of annual production as a sign-on bonus and 200% in performance-based compensation. Since the firms are desperate and throwing money around like candy, advisors that take advantage of it are seeing the huge financial rewards.