More And Better Options For Your Next Move

Advisors Have More Affiliation Options Than Ever, Even In Turbulent Markets, And Small Firms Provide Unique Advantages

Despite tough economic times, financial advisors looking for better situations for themselves and their clients have continued to pull up stakes and change firms. According to a Forbes study, more than 4,200 financial advisors moved in the first six months of 2022. It looks like that momentum has continued into the second half of the year.

In years past, choppy markets, high inflation, rising interest rates and recessionary fears discouraged advisors from switching firms and repapering clients. The risk of losing revenue was too great, so they chose to sit tight and wait for better times.

While some still think that way, advisors with strong books of business and prospects for future growth are in such high demand that recruiting pitches – and the financial incentives – are hard to ignore, even in the current suboptimal environment.

Recruiting has become much more nuanced and sophisticated. Recruiters understand that while the economics of a deal are always important, especially during down markets, it’s no longer just about the money. That has helped level the playing field and increase the competitiveness of firms of all sizes as they search for top talent.

It’s not just about upfront cash

Advisors changing firms are looking for the freedom and flexibility to serve their clients in the way they deem best. After conducting their due diligence, exploring their varied affiliation options, and sitting through multiple home office visits, they will join the firm that can provide the level of control they want – even if it’s not the one offering the most upfront cash.

More Options

There are more viable affiliation options for advisors than ever before – commission-based, RIA and hybrid. This is especially true for wirehouse advisors looking to break away and go independent. In fact, according to Forbes, wirehouses continued to be among the most significant net losers of advisors, while independent firms saw the most success in recruiting on a net basis.

Culture and increased autonomy make independent firms attractive for many advisors. A number of firms in the space have expanded their affiliation options to widen their appeal and let advisors run their businesses on their own terms. 

Was being completely alone a good idea?

Going fully independent and opening their own RIAs is still an option for the most entrepreneurial advisors. While this model provides them with the greatest control and flexibility, for many, the cost, time commitment and risk of operating completely alone is too great to justify.

Many advisors are opting to split the difference and join established “boutique” firms that offer real independence, but also provide infrastructure and back-office support to lessen the burden on the advisor’s time and resources.

Small Firm Advantages

Bridgemark Strategies, an independent consultant for advisor transitions and M&A, reported that in 2021, 82% of the advisors they worked with chose to affiliate with smaller firms or smaller groups within larger firms. The advisors cited support and culture in firms and groups with fewer than 750 advisors as their primary reason for affiliating.

These smaller firms and groups offered advisors the camaraderie of like-minded professionals, along with enough scale to provide value-added service and support, without the downside of being reduced to just another rep code in a large and impersonal organization. 

Smaller firms can also better customize the transition process for advisors and their clients. Making the experience of changing firms as seamless as possible is especially critical in volatile markets. The promise of a smooth transition makes the notion of changing firms more palatable for advisors worried about client attrition.

Market Conditions

The perfect conditions will never exist

Quality advisors with growing practices will continue to have their pick of firms – and a market downturn won’t change that. In fact, for the best advisors, turbulence may provide a better context for a transition. Explaining why an advisor is leaving for a better platform, tech stack or firm culture may make more sense during market disruption.

Michael Nessim, CEO & Managing Partner, Kingswood U.S.

Yet, this may overcomplicate a complex decision. If an advisor is ready to make a move, the individual shouldn’t wait for “perfect” market conditions, because frankly they don’t exist. If advisors have strong relationships with their clients, they need to trust that their business will follow the person regardless of firm affiliation. When advisors improve their situation, their clients benefit. This is true regardless of market conditions. 

Michael Nessim is CEO and Managing Partner of Kingswood U.S., an SEC-registered RIA and FINRA-licensed broker-dealer with over $3 billion in assets under management.

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