With Thanksgiving over and the rest of the holiday season creeping up on us, now is the time when advisers begin to finalize their business and strategic plans for the upcoming year. For many on the wirehouse side, that means laying the groundwork for a move to the independent space.
Typically there's not much actual movement during this time, but decisions have been made and what lies ahead is the execution phase.
As more and more wirehouse veterans think about transitioning to a new model, one alternative to make this process smoother and more turnkey has emerged — especially for those who might otherwise be held back by the powerful pull of inertia — Super-OSJ groups.
For the uninitiated, such groups work with broker-dealers to provide advisers with greater levels of supervision, business coaching and other forms of operational support. In many ways, they seek to replicate the attractive features of the wirehouse world while still offering the added freedom and flexibility that has come to define independence. Technically, OSJ stands for office of supervisory jurisdiction.
QUALITY CAN VARY
The number of super-OSJ offices has shot up exponentially in the last few years. And while many of these firms promise potential recruits everything under the sun, the quality — not to mention the utility — of some of their services tends to vary. Often, advisers end up getting charged for services that are neither critical to their transition nor to their ongoing success.
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With that in mind, here are the top four things transitioning wirehouse advisers must look for in a super-OSJ partner:
1. An experienced transition team that is solely dedicated to operational, non-client-facing details. Once an adviser has made the decision to go independent, his or her focus should immediately shift to convincing existing clients to go with them. Typically, it takes a 60% conversion rate to make this move worthwhile. In essence, therefore, advisers have to win their existing clients' business all over again, which will require countless meetings, many phone calls and a lot of hand holding. That means filling out complex paperwork, conducting transfers and performing other non-client-facing tasks that are critical to any transition but also a distraction that could potentially derail the business. That's why transitioning advisers need a super-OSJ firm with an entrenched level of operational support capable of performing such tasks for them.
2. An effective communications plan. Clients, of course, will want to know why their adviser is changing practices and what that change will mean for them. Word travels fast in financial services circles, and other advisers will aggressively try to poach business from transitioning firms. To fend off such efforts, super-OSJ firms should be able to help advisers craft a customized set of messages that will allow them to best communicate to clients why they decided to go independent and why it will be mutually beneficial.
3. The ability to create scale and reduce costs. One of the strengths of the wirehouse world is the quality of its resources. Day-to-day items such as professional office space and elite administrative, technology and telecommunications support are a given across most firms. In most successful transitions, super-OSJ firms are able to replicate this environment on a scalable and cost-effective basis for advisers on day one, with everything ready to go from the moment the lights are turned on in their new offices.
4. Valuable business coaching. A number of super OSJs, either on their own or in partnership with third-party providers, sometimes offer elaborate business coaching services for a fee. But advisers usually only need two things in this area. The first is a marketing model that supports an independent advisory brand. That's something most wirehouse advisers have never had to confront, since they've always been backed by a large Wall Street name (which, in the wake of the financial crisis, was as much a curse as a blessing). Secondly, they'll also need a set of concrete succession planning options for when the time comes to exit the business. Everything else in this area, from asset management coaching to leadership training courses, is either something most don't need or it's not worth the money.
As more and more wirehouse advisers jump to the independent space, super OSJs have become a preferred avenue for entry.
What advisers need to understand, however, is that not every super-OSJ firm is created equal. Transitioning is hard work. There are many things that go into making this a successful effort. But there are also many services that don't.
Knowing the difference between the two is often what separates success and failure for any transition to independence.
Steven Dudash is president of IHT Wealth Management.