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3 Feb Boston Cardinal

5 Qualities Financial Advisors Look for in a New Firm

We often hear advisors say, “I just don’t wanna make the mistake of joining the wrong firm.” Truer words have never been spoken when it comes to making the biggest decision of your career. It’s true that not every firm is for every advisor, just like not every advisor is for every firm. Which brings us to the question, what are some of the top characteristics attracting advisors to a new firm?”  

Over the last 5 years especially, firms across the financial services industry have continued to differentiate themselves by elevating the level of service financial advisors provide to their clients. We want to share some of the central themes we’re hearing financial advisors say are the most compelling characteristics in a firm. Below are 5 major differentiators in the marketplace that advisors need to consider as they start exploring a new firm to potentially do business with.

Are you overwhelmed by the idea of transitioning firms? Download our free list  of 150+ Due Diligence Questions for Financial Advisors to ask along the way ≫

Team Flexibility

Advisors know their business and their clients better than any large corporation ever will. Companies that provide advisors with the option to operate their practice from the structure of a solo advisor to a large team with multiple advisors across many states, and everything in between, will draw more advisors to the company. The key phrase here is “the option.” 

Something we might not like to admit, perhaps due to ego, is the fact that client expectations have started to evolve and people are becoming more interested in working with a team. To the advisors who choose to continue operating as a solo advisor without a team behind you: know that clients may love working with you, but many are beginning to look for an advisor to replace you in anticipation of your retirement. 

Additionally in today’s uncertain world, anyone may get sick at any moment, so it makes sense that clients would seek out advice from a large team to reduce this risk. Also keep in mind clients don't think about the succession plan for your business the way that you do. By structuring the right team arrangement, you'll solve the problem of "Who will I contact when my advisor is on vacation?" or "Who do I work with if my advisor gets sick?" or the most likely question "Who do I work with after my advisor retires?"

Spotlight: Ameriprise

Over the past several years they started investing in comprehensive systems to support team practices with new team reporting and a “Practice Builder Program” that provides resources to teams looking to acquire or add associate advisors. Since implementing such programs, Ameriprise, like much of the industry, has seen higher revenue per advisor compared to solo producers.

Protocol & Book Ownership

The best advisors are committed to building strong client relationships, and as a result, they should have ownership in their book of business. Meaning, the likelihood of clients to follow an advisor through firm transitions. There are two driving factors related to ownership:

  • Whether or not a firm's protocols put obstacles in the way of advisors bringing awareness of their move to a new firm.
  • What type of relationships an advisor has built with their clients. If an advisor has built solid relationships with clients, clients will follow them when they choose to move their business, equating to ownership.

When we look at firm programs that limit obstacles for advisors to leave, and instead allow advisors to more freely cultivate client relationships, we find that these firms are often the winners when it comes to attracting advisors from other firms. Put another way, firms who make it easy to leave, will also be the firms that make it easy to join.

Spotlight: Raymond James

One firm in particular experiencing success in driving home this concept is Raymond James. In recent years the firm has alleviated the concerns of many advisors exploring a transition by touting the fact that they’re one of the easiest firms to leave. What this really means is, recruiting advisors to a firm that keeps them under lock and key isn’t a very attractive destination for advisors to join. This philosophy should appeal to advisors feeling trapped at their current firms, especially those with more restrictive measures in place meant to keep advisors from leaving. Firms with such measures in place are essentially serving as a recruiting windfall for places like Raymond James.  

Succession Support

One of the biggest transactions an advisor will complete is the sale of their business. We are now at the point where more advisors are retiring than newly registered people are entering the industry. Given this theme, the outlook will be bright for those who take the right steps.

An important consideration for advisors is whether the firm they choose will support them in having control in the choice of who takes over servicing their clients. Advisors may also want to freely market the sale of their business. According to the laws of supply and demand, if an advisor has the ability to sell their practice to a larger number of interested parties, the value of that practice should conceivably rise higher. Think 5 or 10 years out: which firms will have more advisors working for them? The companies that offer multiple channels for affiliation thereby providing sellers with easier access to more potential buyers. The consolidation in recent years with the same firms attracting more advisors will likely continue.

Lastly, when doing due diligence on potential firms to join, take into consideration the number of internal practice sales that have occurred over recent years.

Spotlight: LPL

Due to the sheer number of advisors at LPL, advisors have an easier time finding the right advisor to take over their business, compared to advisors at firms with fewer advisors. Just last week, we talked to an advisor who joined LPL, and asked about the top reasons for doing so. He stated that having access to 17,000 other advisors who might be selling their practices was at the top. With the introduction of the new LPL employee model, we expect LPL advisors to have more opportunities to find the right advisor to take over as their succession plan. That’s not to say a sale to an external party isn’t an option, but internal acquisitions are often simpler and more streamlined than selling to an advisor at another firm. Keep in mind that succession can be a gradual set of steps that take place over an extended period of time. As advisors consider affiliating with an established team, there are opportunities to join forces before a complete transition or sale takes place.

Technologically Innovative

There's a significant divergence unfolding across the financial services industry. We're seeing financial technology (FinTech) companies solve problems for consumers at significantly lower costs. Firms can more easily set up new client accounts, seamlessly transfer funds, and offer low cost automation for tasks that used to take considerable time. 

Most of these innovations solve mundane transactions that are table stakes to avoid making a mistake that would make a client upset, not necessarily something that would create a referable client experience. These technological innovations do not, in themselves, replace the work done by advisors. They can however, reduce the time advisors spend reacting to issues, freeing them up to focus on proactively growing their business and supporting clients. 

An issue we’re seeing is that many broker dealers are not reinvesting enough revenue into better technology to make an advisor’s business more productive. Much of this is brought on by so many old, slow moving firms, who largely rely on their reputations instead of their capabilities. At such firms, changing how business gets done goes against the cultural fabric of the company. The reality is this, advisors and FinTech do not have to be in competition with each other. 

There's an opportunity for advisors to further leverage technology to scale their business. Gone are the days of taking pride in how busy you are today - it’s time to work smarter, not harder. Most important is how available advisors are to talk with clients, respond to their needs, and run a practice with a consistent outreach model so clients know they are top of mind.

One Stop Shop Of Experts

When we think about the value that financial advisors provide to their clients, a main idea is that financial advisors make the complex feel simple. New clients generally approach an advisor with problems and an overall sense of feeling overwhelmed. Advisors start by learning about their situation, crafting a set of steps to complete over time, and putting the client on track to accomplish their goals. Many of these steps overlap with work that’s done by other people across a host of professional services. 

Enter stage left, all of a sudden the “One Stop Shop Firm” is here to offer clients in-house solutions aimed at making their financial lives easier. As most financial advisors experience, many clients who have a financial advisor also need to utilize the expertise of legal professionals and tax professionals to bring their entire financial plan into view. Firms offering this one stop shop set of services are positioning themselves as the holistic solution for supporting clients with their core set of professional services needs. 

While this may seem like a new concept for the advisor with 30 years of industry experience, there are new firms that have recently found great success implementing this model, thereby alleviating the client’s burden in having to work with various different parties to get things done. While not necessarily of value to all clients, such a solution can be a thought provoking selling point for the affluent client with complex estate planning needs or small business owners requiring ongoing tax planning.

Research to Consider

Think about whether or not your clients may be looking for these qualities in other firms. If so, we’d love to talk with you and help you research the options to quickly shine a light on the areas where you and your clients would benefit most. If you find these characteristics in other firms before your clients do, it could really benefit your practice in the long-run.

Are you overwhelmed by the idea of transitioning firms? Download our free  Transition Guide for Financial Advisors for over 150 helpful questions to ask  along the way ≫

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