How to Build, Cross and Burn Bridges

With client revenues increasing at most independent firms these days, another challenge is advisors leaving and taking clients with them. This is not just happening in the broker world with breakaways. We are seeing a large group of advisors at independent firms leave and take clients.

Surprisingly, the cause of this costly exodus isn't really the advisors involved. In many larger independent firms today, clients are assigned a "client service" person, who is their primary contact with the firm, and it's this person who most clients form the strongest bond.

Many of today's lead advisors have noticed these client service relationships. Therefore, when they decide to leave their firm, they take with them the client service person who has worked with their clients. Ironically, it seems that clients are more likely to follow with the CSR than they are their advisor alone.

The good news is that there's a fairly easy fix for this situation within your organizational strategy. I've recommended that firms stop assigning CSRs to specific clients and, instead, rotate client calls among all their CSRs.

That way, clients form an attachment to the high quality of service they get from the firm, rather than a specific person — and therefore are far less likely to leave the firm with a CSR or an advisor.

5. Review your service model.

Millennial generation advisors are creating a new advisory model that's targeted to the needs of millennial investors.

The bad news is with their clear separation of advice from asset management, it's very different from today's Baby Boom/GenX approach. The good news is to add this new model to an existing old-school firm, all you need to do is hire a millennial advisor and let her/him do her/his thing.

The key to this new millennial advisory model is simply charging a relatively low monthly fee for financial advice ($150) and then directing the clients where to open their own investment management accounts and how to allocate them.

By dealing with their clients exclusively online or on the phone, millennial advisors can deal with three times the number of clients of traditional advisors, which makes this model very profitable and less labor intensive.

With a possible market correction looming, the flat-fee millennial model will become a much-sought-after addition to many traditional firms in the coming new year.

6. Manage your bridges.

To survive and prosper in the new year, owner advisors are going to have to take a hard look at their "bridges." Staying competitive and doing what's right for your business is going to require some changes, and some may be harsh.

The key will be staying true to your goals while taking a hard look at virtually every facet of your business and making required changes. For example, some employees and/or partners may not fit anymore or your service model may not be right for the future (vs., say, the new millennial model).

The vendors custodians or broker-dealers that you've worked with for years may not serve your needs any longer. Even some clients may not be a good fit anymore.

For many of today's independent advisory firms, success in the coming new year and beyond is going to require making big changes. In my experience, if you're not ready to do something different, you're not ready to grow.

The only things you shouldn't change are your values and your goals.

In the coming year, financial advice will be pivotal and challenging for the entire industry. As you see changes occur, remember the key to surviving the seeds of destruction is how you manage your bridges: Some bridges you build, some you maintain, and some you burn.