Recruiting in a Market Meltdown: Have the Rules Changed?

Independent Firms Across Business Models See Pros, Cons to FA Recruiting During Turbulent Times – With Recruiting Automation Tools Reshaping the Calculus

Julius Buchanan, Senior Contributing Editor, Wealth Solutions Report

Industry orthodoxy holds that, when markets are plummeting, financial advisors tend to stay put rather than transition to a different firm. 

The reason?  Transitioning to a different firm requires repapering client accounts, which typically necessitates client authorization and a review of client accounts. 

During a severe market downturn, this puts transitioning financial advisors in an unenviable position:  They not only need to pitch their clients on why this move makes sense – even if there is logistical disruption involved – they also need to discuss portfolio performance at a time when returns are far from spectacular.

But is this calculus still so simplistic in this day and age?  Changes in recruiting strategy, deal structures and technology could be making these assumptions obsolete.

WSR Survey on FA Recruiting

Consider the following highlights from WSR’s latest survey of financial advisor readers on changing attitudes towards transitioning between firms during a market meltdown:

The survey encompassed a wide segment of over 200 financial advisors affiliated with independent broker-dealer / corporate RIA firms, hybrid RIA firms and RIA-only entities supporting independent contractor advisors.

  • 73% of financial advisors surveyed either agreed or strongly agreed that adverse market conditions are less likely to be the top consideration in transitioning between firms versus five years ago
Changing attitudes about switching firms during market downturns?
  • Within this subset of advisors, 79% either agreed or strongly agreed that a market downturn creates opportunities to highlight the advisor’s unique value proposition beyond investment management for clients
  • Also in this subset of advisors, 87% believe a firm’s transition support and post-transition resources are at least as important, if not more important, than market performance considerations for financial advisor discussions with clients about moving firms during a severe downturn
  • Finally, within this advisor survey subset, 67% believe the technology tools and resources exist to make transitioning between firms “substantially less burdensome” today versus five years ago.

Going beyond the numbers, it’s clear that each distinct segment of the independent wealth management space has been rapidly evolving new capabilities and tools that are playing an increasingly vital role in getting financial advisor recruits off the fence.

And the current market slump is providing firms with the opportunity to put these recruiting strategies and resources to the test in real time.

Overcome With a Winning Mindset and Capable Partner

Much of the recruiting landscape today is driven by a recognition that repapering and difficult client conversations about portfolio performance, while valid, aren’t at the center of advisor concerns during this time – Instead, the single greatest concern is uncertainty, which is an issue that firms with the right resources can use as a selling point with prospective recruits.

Kevin Beard, Chief Growth Officer & Founding Partner, Atria Wealth Solutions

Kevin Beard, Chief Growth Officer and Founding Partner of Atria Wealth Solutions, an independent broker-dealer with almost $104 billion in assets under administration and serving 2,346 professionals at the end of the first quarter, certainly falls in this camp.

Beard believes financial advisors who have built relationships with clients based on open and detailed communications can use a market downturn as an opportunity to underscore the full scale of their value proposition beyond investments.

According to Beard, “This is a time when financial professionals can shine. If they’ve built a book of business the right way and have truly educated their clients about the realities of the market, then this is merely another market swing.”

The advisor who has focused on more than just the bottom line can now “capitalize on well-conceived processes and efficiencies and deliver a better, more balanced, experience to clients, exuding confidence, strengthening relationships and ultimately gaining referrals.”

What’s in YOUR transitions toolkit?

Beard adds that the advisors best positioned for growth are the ones with a partner that both understands them and has the resources, including talent and technology, to capitalize on opportunities in turbulent markets.

Beard states that Atria implements these strategies, including providing technology resources for advisors, giving as an example the firm’s new account opening process that can open an account in as quick as five minutes. “This technology really transforms the speed and ease of transitioning a book of business with significantly less downtime than traditional methods.”

The client-facing portal, according to Beard, is another technology tool that provides strength during market downturns by enhancing relationships and human connection “so financial professionals can give clients the confidence they deserve exactly when they need it most.”

Make Sure You Understand the Affiliation Models on Offer

Amit Dogra, President & COO, tru Independence

Amit Dogra, President and COO of tru Independence, which is strategic partner to 24 advisory firms with $8 billion in assets under management, agrees that strong communications and plentiful resources underpin the best advisor-client relationships.

“The different tools, technology and ability to communicate with clients in independence are many and at tru, we have seen the best advisors leverage the best forms of communication and best practices on interactions that we are able to deliver to our advisors. It allows our advisors to change the way they engage with clients from reactive to proactive.”

Dogra counsels wirehouse breakaway advisors during this time to ask what affiliation models the potential partner offers because his firm emphasizes that advisors must make their own decision on the type of independence model that works for them.

“Most providers or support models tell you how you should affiliate and have rigid guidelines: W2, 1099 or launch your own RIA. This is the biggest decision an advisor can make when they leave the wirehouse and they are being forced to choose how to affiliate by a provider before they really understand what it all means.”

Does Flexibility and Service Supersede Immediate Market Performance? 

Jon Hoy, Chief Operating Officer at Perigon Wealth Management, with $3.3 billion in assets under management at the end of the first quarter and serving 46 advisors, sees the flexibility of independent RIAs like their firm as key in recruiting.

Jon Hoy, COO, Perigon

“Many IBDs and corporate RIAs have specific core technology platform requirements while independent RIAs can offer more choices. An independent RIA also typically offers advisors the flexibility to use the investing strategies that work best for their clients. This factor becomes significant during a severe market downturn.”

In addition, Hoy emphasizes that unstable markets highlight the service standards of an affiliation partner: “Advisors, regardless of affiliation, are increasingly focused on offering custom solutions for clients. An independent RIA provides more optionality for an advisor in how they deliver client service.” 

Hoy states that his firm recognizes the numerous issues facing advisors during market turbulence, “and works on establishing reasonable incentive compensation targets and fair valuations for advisors in the recruiting process. Markets will recover so advisors should not have to make sacrifices in compensation and business valuations.”

In addition, Hoy believes that his firm’s flexibility to affiliate with advisors through minority-stake partnerships gives it a recruiting advantage: “We understand there are advisors who have recently experienced another substantial change such as succession, change of custodian, rebranding or wirehouse breakaway, and want to temper additional disruptions. And there are others who are reluctant to commit to a full partnership.”

FA Recruiting Automation:  A Game Changer?

Cutting across each firm’s pitch to prospective recruits is the rise of financial advisor recruiting automation, which has the potential to serve as a game changer in today’s recruiting landscape.

One example of such a provider is wealth management workflow automation firm Docupace, which launched its Advisor Transitions Program in 2016.  The platform is designed to help financial advisors re-paper all client accounts at one time as they transition from one firm to another.

David Knoch, CEO, Docupace

According to Docupace CEO David Knoch, in 2020 alone the company’s transition automation program supported 314 advisors, who moved more than 111,000 accounts to different firms, while significantly reducing transition timeframes.

According to Knoch, “While financial advisor transitions commonly take as long as six months to complete, the Docupace Advisor Transitions Program moved over 72% of client accounts in 30 days or less.”  Knoch added that approximately 86% of client accounts supported by this program transitioned in 60 days.

In Knoch’s view, “Financial advisor recruiting automation, when done correctly, can take much of the logistical and administrative burdens off the table, which enables the advisor to focus on client relationship management throughout the transition process.”

Recruiting automation technology – Bringing advisors off the fence?

“For advisors who have done their homework and know they are better off at a different firm, using technology automation to relieve them of many of the transition process burdens can be what gets them off the fence.”

The Cynical View on Why Recruiting Keeps Happening Now

While there are doubtless multiple positive forces driving continued financial advisor transitions during this latest market downturn, multiple third-party recruiters also point out that harsh demographic realities could be the top consideration for many professionals making the move to a different firm.

One third-party consultant who requested not to be identified noted, “More hand holding from firms and better technology that simplifies the recruiting and transition process are great.  But it would be naïve to ignore that many financial advisors are switching firms during this market meltdown simply because they are getting older.  Their options for future value creation are shrinking, and they know it.”

“Everybody talks about how much of the financial advisor profession is aging out, but advisors remaining in motion throughout a market meltdown underscores this trend.  If you have maybe another five years or so left before you want to retire, switching firms now could be your last chance to get a few vital priorities sorted out.”

Switching firms now when your runway is limited

These priorities could include finding successors from a larger or different pool of advisors who are willing to buy the transitioning advisor’s business upon completion of the move. 

This could also include receiving a large up front check in the form of a five year forgivable loan equivalent to twelve months of trailing revenues of the advisor’s book of business, a common industry practice.

“Would many of these advisors staring down their final half decade of work stay on the sidelines if switching firms were as tough as it used to be a decade or more ago?  Absolutely.  But better resources and technologies that firms are offering are frequently hastening the inevitable, versus dramatically shifting hearts and minds.”

Julius Buchanan, Managing Editor at Wealth Solutions Report, can be reached at

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