Several years ago I wrote about what motivates advisors to change their broker-dealer. Much has changed since then, so it's time for an update. This time, rather than basing the reasons solely on our own recruiting experiences, we sought out the feedback of various broker-dealers for greater objectivity. Also, this review focuses on the perspective of advisors who are already at an independent broker-dealer and looking for a new one. We didn't bring wirehouse advisors into the mix, as their criteria for change are somewhat more static and narrowly focused.
The Top Five Reasons Advisors Make a Move: Then
- Unhappiness with their current relationship
- Seeking better business support services
- Looking for better technology
- Need better product offerings
- Desire for higher/lower payouts
The Top Five Reasons Advisors Make a Move: Now
- Discontent with culture change
- Worn down by heavy-handed compliance
- Desire to net more
- Looking for greater service
- Wanting financial stability, no baggage
As we look at the current situation, the first thing to note is that technology has fallen off the list. Five years ago, reps chased after consolidated client statements. Two years ago, reps sought out firms that had paperless, centralized, web-based technology platforms. Today, most broker-dealers have both of these, so with no new "hot thing" in technology, it's not the differentiator it was.
Product offerings have also become more similar from firm to firm, to the point where today we rarely see it as a motivator to move. Business support services such as practice management and marketing are outstanding ways to grow a business. However, we simply don't see reps leave firms with the motive of seeking out those services. Business support services are looked at more as the icing on the cake—something that advisors may or may not use, but not a primary motivator for change. Marketing lead-generation programs would be the exception to this. As reps look to grow their book, few firms currently have quality marketing lead-generation programs. We see this as the next evolution for broker-dealers, as this service is highly sought after, benefits everyone and builds loyalty to the firms that provide such services.
Reason No. 1: Culture Change
Historically, dissatisfaction with culture has been concentrated with larger broker-dealers having more than 1,500 reps, and insurance-owned broker-dealers. Problematic culture revolves most frequently around communication layers between reps and management, and the flexibility of the firm to accommodate the advisor's individual needs. What was once a platform that met the needs of an advisor can change as the practice evolves. Some firms have a set platform that the advisor needs to operate within—if any special needs come up that are outside of their box, a firm's flexibility is tested. It's at that point that reps start looking at alternatives.
Fast broker-dealer growth and firm acquisition are the largest contributors to negative culture change. Advisor feedback on how management was once approachable but now only the highest producers get any attention is increasingly common. As firms grow, the ability to maintain quality relationships between advisors and management becomes more difficult.
Reason No. 2: Heavy-Handed Compliance
As FINRA has become increasingly heavy-handed with broker dealers, it seems to trickle down, with broker-dealers' compliance departments being increasingly heavy-handed with the reps. Annual audits of reps' offices have become unusually obtrusive, going as far as prying into a spouse's checkbook. Audits are frequently performed by compliance staff who have only a few years of industry experience and are dictating down to reps who have been in the business for 20–30 years.
Paperwork audits have also taken a strange twist. Six months or more after an audit takes place, an advisor may be notified of paperwork improprieties and then told to either find a new home or be terminated, depending on the gravity of the transgression. The tone and intolerance levels have become more hostile than we've seen before.
Another motivator for movement is when the compliance department becomes the sales hindrance department. This environment can provoke advisors to look for firms that are marketing-friendly. Granted, we have seen a greater influx of regulations that have been imposed on broker-dealers. However, regulations are rarely black and white, and there is often some room for interpretation. The unfortunate outcomes are when broker-dealers choose to dictate to the darker side of grey.
