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Advisers: 5 reasons to vet 5 firms before making a move

Jan 31, 2014 @ 12:01 am

By Tom Daley

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Deciding to make a move to a different firm is a complex and, at times, confusing process. Changing affiliations or transitioning to a new business model is much more than simply changing the awning over the door. Change for the sake of change is often a costly move in more ways than one.

I always encourage advisers to look at a minimum of five firms. Here's why.

1. Discover Opportunities You May Not Have Otherwise Considered

A lot of advisers start the search by connecting with firms based on referrals from colleagues or something they read in a trade publication. This can be a great start, but if you stop at this point, you won't know what you don't know.

Do your own independent research to find three or four more firms with a value proposition matching the criteria you are looking for in your next firm. If you find a firm or business model you hadn't originally considered but looks intriguing, this is the time to check it out.

Think you want to start your own RIA or independent company? Why not look into tucking in with an existing RIA or firm as well, for comparison.

We have seen tremendous growth and opportunities for advisers to align with existing branches that didn't exist just a few years ago.

2. Gather Enough Data to Make Constructive Comparisons

Finding the right firm should be about more than comparing payouts and expenses or transition packages and upfront money. Ultimately, the decision to change firms should create added value to the adviser's clients and foster business growth.

Compensation is important. As a practicing adviser, it's equally important to affiliate with a firm investing in areas designed to help you build your business and serve your clients. With data from at least five firms, you will get a clearer picture of the industry landscape and where to direct your search.

Is the firm generous on payouts and technology offerings but lean on marketing support? Will you be able to conduct commission and fee-based business? What about alternative investments? What is the adviser-to-staff ratio?

3. Understand Your Value in the Marketplace

Once you engage confidentially with your top five (or more) firms, they will begin to learn more about your business and, in turn, you will begin to understand their commitment to your business. Additionally you will gather information on payouts and expenses, as well as initial transition offerings.

This information will reflect the economic value, both short and long term, that each firm is able to provide. Remember, the overall service value of the partnership will always be greater than a one-time transition offer. Thinking long-term is critical.

Joe Moyer, president of Moyer Financial Group and an adviser with 34 years of experience, used The Advisor Center to research firms objectively. He ultimately decided to transition his practice to a new broker-dealer. He looked at 12 firms and says it was critical to valuing his business. Learn more about Joe's story.

4. Narrow Your Search Down to Two Firms; Educated and Informed

You've spent time capturing due diligence, researching business models, identifying growth opportunities and analyzing comparisons. At this point it should be clear which two firms you'd like to visit and research even further.

With your detailed competitive analysis in mind, these meetings will be more productive and informative. Use the time to learn more about the firm's culture and value proposition as well as to ask specific questions as they pertain to your unique business and future goals.

5. Negotiate with Confidence

You know what's out there. You know what you're worth. You know what you want. When the offer comes, you can negotiate with confidence.

If for some reason you can't come to an agreement, you have the next firm you'd like to engage teed up and ready to go.

Most financial advisers will change firms during the tenure of their careers — for a variety of reasons. Take control of your search to ensure you move to a firm fostering the growth of your business and your ability to provide service to your clients.

Tom Daley is the founder and CEO of The Advisor Center, a strategic partner to InvestmentNews.

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