Advisors move for a variety of reasons—typically a combination of “push factors” (frustrations or limitations at their current firm) and “pull factors” (the excitement around expanding their capabilities and growth potential).
Currently, advisor satisfaction with the “big firms” is also historically low. Yet, only a small percentage of advisors change firms each year.
So rather than questioning why advisors move, perhaps the better question is this: Why do so many advisors stay put?
One theory suggests that advisors stay put because inertia and a “status quo mindset” are powerful demotivators. Plus, moving is disruptive and risky, so staying put is the path of least resistance.
But in our experience, advisors more commonly point to a different reason for eschewing change: “It’s the same everywhere.”
So, if the case stands that all firms and models are the same, then staying put seems like a wise decision. However, advisors (especially those advisors who have not explored strategic options in recent years) may be surprised to learn that there are important differences between firms and models.
Here are three critical areas to evaluate when looking to determine how one firm or model stacks up to another:
1. Culture
Culture can be difficult to evaluate, but it’s often one of the most differentiating factors of a firm. When advisors describe frustrations, there often is no single major headache they point to. Rather, it’s a sense of a broken culture in which firms are increasingly fighting against rather than for their advisors. Culture, however, is inconsistent from one firm to the next, even when comparing two firms in the same channel (one wirehouse vs. another). Of course, big firms will always have elements of bureaucracy and red tape; in an industry as regulated and scrutinized as ours, that’s unavoidable. But culture should be thought of along a spectrum: Firms that fall further down the spectrum (such as regional and boutique firms) are more nimble and have greater ability to strengthen culture. This is why firms like RBC and Raymond James have successfully recruited wirehouse advisors, touting strong cultures that advisors can feel from day one. Boutique firms like Rockefeller Capital Management, with a total headcount of under 500 advisors, also house many sophisticated ex-wirehouse advisors who view the cultures as similar to the “wirehouses of old.”
How can advisors assess a new firm’s culture before joining? We often facilitate “name-blind” calls between an advisor recruit and an advisor at the prospective firm. There is no better way to understand a prospective firm’s positive and negative traits than straight from the horse’s mouth and without preconceived notions based on brand or model.
2. Technology and Investment Platform
Interestingly, wirehouse advisors are often quite content with their firm’s technology and investment platforms. This is one area in which we generally agree. From a core tech stack and investments menu perspective, most traditional firms (i.e., wirehouses, regional firms, boutique firms) offer a similarly capable solution. They are perhaps not the most cutting-edge and sophisticated platforms, but they provide more than enough for advisors to service their clients. Still, it’s important to think outside the proverbial box when evaluating the platform: You may be able to service clients adequately with the current solution set, but could you do even more with access to cutting-edge solutions like advanced planning software, bespoke alternative investments, etc.? Perhaps a firm built on an independent RIA chassis, where technology can be customized and advisors can “shop the Street” for investments, would be needle-moving.
How can advisors evaluate a new firm’s tech/investment platform before joining? Every firm that recruits advisors understands how critical it is to showcase their capabilities early and often. Accordingly, most advisors will demo key pieces of tech and speak to firm leadership across various core competencies during the due diligence process (for example, if you are an advisor who trades a lot of municipal bonds, you might speak with the firm’s head of fixed income trading).
3. Compliance and Risk Appetite
Broadly, this can be defined as the ease of doing business. All large broker/dealers are subject to stringent compliance, risk, and legal oversight. And that’s not a bad thing! Many of those safeguards are in place for the benefit and protection of advisors. But unfortunately, the hyper-sensitive compliance world we work in has forced many firms to over-correct, and they now manage compliance and risk well beyond the standards mandated by FINRA or the SEC. This concept also includes exception management. For example, if you need approval on something, are you likely to get it? And will the firm respond in a timely fashion? Similar to culture, we think of “business friendliness” as a spectrum, where generally smaller firms (regional and boutique firms, and certainly independent firms) are head and shoulders ahead of their wirehouse peers.
How can advisors evaluate a new firm’s compliance and risk appetite before joining? Speaking “off the record” to other advisors at the firm to glean their impressions is a great way for prospective recruits to get a real sense of how business-friendly a firm is. Also, you might pose hypotheticals to management during the recruiting process: “If I ask you for approval on XYZ, what might your response be?”
There are countless subtle differences from one firm or model to the next. Nevertheless, many advisors live with the perception that “where it counts, most firms are all the same.”
We would argue that the expanded industry landscape has rendered that thinking outdated. There are too many legitimate options with unique value propositions for top-quality advisors. Advisors may not find something better enough to justify the hassle and risk of a move, but they will assuredly find something different enough.