Your IndustryJan 6 2016

Should I stay or should I go?

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The case for leaving

Big advisers and teams choosing to change firms is headline news on industry websites. Many factors motivate advisers to leave:

1.The big payday: The successful adviser makes a good living, yet he sees the chance to get a few years’ income upfront as an opportunity too good to miss.

2. Free agent status: A branch manager likened managing star financial advisers to coaching a professional sports team. These advisers often have employment contracts. Once the contract is up, they start looking around for their next big payday.

3. Owning your own business: Going independent is popular in the US. Several networks help advisers provide back office support and help with the transition. Others allow advisers to affiliate and run an almost independent business under their umbrella. The adviser keeps lots more of the revenue.

4. “We are bankers now”: When the adviser’s firm is acquired by a bank, senior brokerage management is replaced by senior bankers. The adviser feels his new bosses do not value him.

5. The Roman galley: The adviser has built his career at a very structured firm which dictated that everyone did business the same way; all pulling on the oars together. The adviser succeeds, but does not like the culture, and decides to move elsewhere.

6. The new compensation plan: Behaviour is driven by how advisers are paid. The adviser is comfortable doing business in a certain way. Learning that he will be paid less under the new plan, and reluctant to focus on different products and services, he leaves.

7. Joining friends: Friendly advisers who used to sit near the adviser have taken the upfront money and left. The adviser leaves to join his friends and collect a big cheque too.

8. Toxic brand: The adviser’s firm is in the news for the wrong reasons. Clients want to jump ship, and the adviser is struggling to keep them. Questioning the integrity of his own firm, he is motivated to find another firm with a better brand.

9. Goodbye big client: The adviser’s largest client has suffered a fatal heart attack. He decides to go for that big payday while his numbers still look good.

10. The hiring manager left: The branch manager who hired the adviser and helped him build his career has left for another firm. The adviser follows.

11. Offices merge: The adviser is top dog in his office. Now his location is closing and the advisers are being absorbed in another office. Since he is moving anyway, the adviser decides he may as well change firms and make some money.

12. New office manager: The previous manager has been promoted. The adviser does not like the new manager, and decides it is time to leave.

13. Upgrade: Banks, boutiques, regionals and wirehouses all have reputational positions in the pecking order. Investment banks and private bankers top the list. Moving means moving up the ladder.

14. Following the team: The key advisers on a team have changed firms. The remaining advisers see a better future if they keep the team together.

15. Debt problems: Some advisers are bad at money management. One such assumes the good years will last, until business takes a downturn and he is in serious debt. He needs a big payday.

Why do advisers stay at one firm?

On the other hand, many advisers ignore the tempting call of upfront money and sit tight, for one or more of the following reasons:

1. Loyalty: The adviser joined the industry from another career. The firm trained him and helped him build a successful career. He is happy to stay.

2. Golden handcuffs: Many firms feel they must encourage advisers to stay. In addition to regular compensation, the adviser earns bonuses held in suspension for several years. If he were to leave, this money would stay with his former firm.

3. Team structure: The competing firm might hire the adviser, but might not take his entire team. The adviser is sure the remaining team members would aggressively compete to keep the assets at the old firm.

4. Selling the book: The adviser’s firm allows him to sell his book and get a payout when the time is right.

5. Good culture: The adviser likes doing business a certain way. Either his chosen firm has the same culture or it is happy to leave him alone.

6. Prestige image: The adviser’s firm has a great reputation and plenty of brand awareness. People feel they are taking a step up doing business with this firm, which helps the adviser close business.

7. Giving back: Some successful advisers like teaching. They receive additional compensation to run training programmes for new advisers.

8. Broken promises: The adviser’s competitor’s contract spells out the big things, but not everything. There are verbal promises about soft items require a degree of faith, but as it is often said: “If it is not spelled out in the contract then it is not part of the deal.” The adviser distrusts the other firm.

9. Management track: Getting additional compensation to handle some sales manager duties, the adviser sees himself as a future branch manager, not a career adviser.

10. Succession planning: The adviser plans to bring in his children and gradually move the business over to them.

11. Money is not everything: A big payday would be nice, but taxes will take a big bite. The adviser has an easy commute, allowing him to spend more time with his family. He places a higher value on time than money.

12. Who owns the clients?: Although the firm might agree the adviser “owns his book” he might segment clients, fighting for those gained as in-house referrals or reassignments. Moving could get sticky.

13. Great manager: The branch manager who hired the adviser treats him with respect. The two share a personal and professional bond.

14. Office support: The adviser’s paperwork issues are always resolved promptly. He has a large private office, and support staff provided by the firm. This has a high value.

15. Exit strategy: The firm allows experienced advisers to semi-retire by joining or forming a team. The adviser gradually reduces the number of days he works while still earning a slice of the team’s revenue.

In closing, it usually takes more than one reason for an adviser to choose to change firms or stay. Two factors dominate – advisers want to be appreciated and they dislike change.

Bryce Sanders is President of Perceptive Business Solutions