Retained


The lion share of advisors remain at their brand name firms.  The financial press leads us to believe that most of them have broken away to work as an independent wealth manager.  Is this fake news?  This week we will examine why so many advisors have been retained by their current firms.  Is the independent positioning lacking or are the established firms smarter than we think?

Inertia

Inertia is a powerful force.  It is easier to stay put that to make a change.  Inertia keeps 95% + of employees at their current job.  History has shown that shocking events can overcome inertia.  If the news is shocking it is by definition impossible to predict.  Recruiters and Advisors can address this by researching a viable Plan B when things are calm.  Calm environments can make us complacent.  Use the calm to create a viable Plan B.  Creating a plan is not as risky as executing the plan.  That can wait until something shocking happens.

Money

After The Financial Crisis Wall Street raised the fence around their firms and issued seven year retention loans to lock up their best advisors.  The money helped ease the pain and fears caused by the dramatic decline in the market.  The retention “bonus” structure prevented advisors from leaving the firm long after the pain of the Crisis wore off.  Wall Street management showed that they realized the importance of their advisors’ client relationships and they also understood the power of inertia (read above).  The other powerful card that Wall Street has is their compensation structure.  Advisors have more products and services to offer and even though the products have an embedded conflict they pay the advisor more than the unconflicted structure of an independent advisory firm.  As much as we know that this structure is not in the client’s best interest.  Money talks!

Kool-Aid

Our current firms have done a great job convincing advisors and their clients that the firm has spent the requisite time and money to create unique investment ideas that will make money and would be difficult for the advisor or client to identify on their own.   Independent advisors position their firms to emphasize that taking an unconflicted approach to selecting the best investment ideas is superior to the limited options at a large firm.  Is that enough to entice advisors and their clients to make a change?  To date that positioning has had some success as independent firm assets have grown from 16.8% of wealth advisory assets to 22.7%.  Does this positioning trump money (read above)?

The IPO of Focus Financial will answer many of these questions.  In the interim let’s drink the water of independence instead of the Kool-Aid of Wall Street.

Comments

Post a Comment

Popular posts from this blog

Inorganic

Image
Our industry has always looked down on Wall Street’s recruiting checks.  Last week there were numerous announcements that independent firms were offering advisors money to purchase their practice.  The term for these transactions is inorganic growth.  This week we will look at why these transactions are the new rage and examine if they are better than the old Wall Street checks. Wempy Popeye and financial advisors fall for the “I’ll gladly pay pay you tomorrow for a Hamburger today” pitch.  Unfortunately Popeye and and most financial advisors provide their hamburger but seldomly get paid what the firms and Wimpy promise .  Why?  The advisors need the cash and Popeye is gullible.  On Wall Street the deals adjusted when the advisors changed firms looking for a new deal every five to eight years.  The recent Luminous departure shows that the advisory contracts need to be adjusted.  The new contracts are written by experienced firms and lawyers to prevent serial departures. 
Read more

Stop Judging

Image
I have known that I have MS for over four years.  My doctors believe I have had MS for over twenty years.  Initially, When I received this diagnosis  I was very opinionated when I saw disable people. I assumed the worst. As a currently disabled person I can educate and warn you regarding things you shouldn’t say to me or disabled people..  This blog will educate on my disability. The places it manifests itself and how you can react and support me and other disabled people. The three items are: 1.) Needing a walker 2.) Government disability  3.) Falling MS causes me to loose my balance and fall.  The walker prevents this reality  I look at walkers as being as sign of old age,  I was incorrect and a good walker is an aid!  With a walker I fall less often.  I might look old, but I am OLD! Our government provides support to the millions of MS patients in the US.  Support is through Social Security and must be approved.  I am approved. The service can be cancelled if i get a full time job.
Read more

Summer Changes

Image
  Our summer is almost over,  What did we learn during all of our downtime?   I will summarize all of my observations and share my plans on what I will implement when I return to my office.  I discovered/ learned 6 items on my beech lounging, morning walks and social media tolling that I’ll share.  Hope they help.  My first and easiest change was my eye glasses.  Many of my friend asked it was trying to look like Elton.  I wasn’t…. The next three changes were business related. The changes will be voted on by my colleagues.  Steve Jobs of solving client problems the client didn’t know they had will be our guiding light.  I tried to change a few items. The obvious item what I changed was my eye  glasses.  The other areas were business related and I wanted wanted to be in control of my changes. The first change s our business’s model.  It has taken years to realize that I can’t beat thr market index.  Growing up on Wall Street this change was difficult.   Alpha is difficult to achieve an
Read more