Sirianni: Wirehouses Lock In Advisor ‘Loyalty’
1. You’re not really an entrepreneur.
Advisors at Wires are like professional athletes. They face the core conundrum of the pro athlete versus management: “When I call it a game, you call it a business, and when I call it a business, you call it a game .” Same for advisors versus Wires: “When you call me an employee I say I’m an entrepreneur, when you say I’m an entrepreneur I say I’m an employee.” When you want to sell your book in the free market, they say you can’t because you’re an employee. When you need to hire a new assistant, they say invest in your business because you’re an entrepreneur. You know the drill. Wires want to cultivate the idea of entrepreneurship where it suits them, and remind you that you are an employee when its in their interest.
Thumping your chest in front of your branch manager and stepping out on your own are two different things. Many advisors have skill sets that make them fantastic client advocates and sales people, but poor managers. If you will be thrown for a loop dealing with HR issues, cable versus VOIP, or creepy landlords, then independence may not be for you. Even in the modern hybrid world where firms like HighTower, Dynasty, Steward, and Washington Wealth try to take as much as they can off of your plate, you still need a mindset that is going to be ok in an entrepreneurial situation, where you will be called upon to make many more decisions than you are currently making. If all you want to do is keep your head down and work with clients, and you are comfortable with paying someone 60-70 percent to take care of everything else, then you’re not really an entrepreneur. This is no crime, the better you know yourself the less likely you are to make a poor breakaway decision.
2.You owe your firm a lot of money.
Many advisors, recognizing the fragility of the world we inhabit post 2008, placed any money they received from their firms as bonuses in the bank. Many more did not. Sadly, like the cobblers children with holes in their shoes, advisors often fail to heed their own prudent advice on investing, and are upside down with their firms, which, of course, the firms like. The simple Wirehouse model is to bribe you to stay and to sue you when you leave.
Wires will get the money you owe them back one way or another, as they should. If you have real current financial issues, compounded by a large upside down bonus, the indy space will not make you whole in the short term. Deals range from 30 percent to 100 percent upfront with the decided advantages coming longer term, through payouts between 70-90 percent, and even longer term through equity plays. Being independent means taking the long view and being financially responsible and prudent, and may even mean money out of your own pocket to achieve a long term goal. Employees are your worry once you break, and if you don’t have the resources to provide for them and their families should another crisis come, you shouldn’t make the break at all.
3. Your firm is the Brand, not you.
Most Wirehouse advisors start out in excellent training programs that emphasize their firm’s culture and history. New advisors rely on their firm’s reputations to sell products rather than their own, gaining confidence in themselves only over time. Eventually, most advisors recognize that the differences between firms are blurry, and that they have to sell themselves and not their firms. This process of advisor maturation was sped up in the financial crisis, when storied franchises went belly up or were absorbed by competitors. Clients were worried about Wire survival and bonds between clients and firms were severed. This facilitated teams self branding efforts and the growth of the indy movement.
Today most teams have realized that their clients are at their firms for them, not the Wirehouse’s reputation. Savvy teams have deemphasized their parent firms on everything from brochures to business cards. In many instances, advisor brands exceed firm reputations in integrity and customer loyalty, as far as clients are concerned. Even so, new advisors, some old school producers, and others feel that their association with a national brand supersedes their team branding and enhances rather than deters their marketing efforts. These advisors will not be comfortable in the indy world, where team branding must be done at the highest level, and where they may be uncomfortable explaining to their clients who their new firm is. If you haven’t done the work to brand your business, you have no business taking it on the road.
4. Your book is full of proprietary products.
Many advisors at Wires drank the Kool-aid with mixed results. Many of their best clients got involved in hedge deals that will take years to unravel. Others feel that their mortgages are too tied to their trading accounts. If you feel that way, you are probably right. As a rule, my experience is that the vast majority of clients move with their advisor even if that means leaving a product or two behind to be serviced by the old firm. That being said, only you know if your clients are in specialty products that have left a bad taste, or are too tied to the firm to leave. Trust your gut instinct here and don’t test them. You can get them out of bad products and they will thank you, if they are doing great in proprietary products leave them alone and don’t move.
5. They haven’t gotten to you yet.
Your office has had low advisor turnover, the guy in the cage has been there forever and knows your clients trading habits, and you have had the same producing manager for twenty years. If this is true, you are not in a primary or even secondary urban area, but more likely in a wealthy town in the sunshine South or the Mid West. The Wires have gutted branches of resources and managers in all of their primary locations, severing ties that have existed for decades in many cases. Their cynical theory being that the bribes would hold advisors in place long enough to accept their new realities. Fewer staff and services for the same percentage and less experienced (cheaper) managers, have led to morale issues in most places.
But not everywhere. If your branch hasn’t changed, and your clients are happy you should be too. I have met many advisors who think they should leave a Wire but have no good reason to. If you don’t have a push factor, you shouldn’t leave. Money should never be your chief motivator because it will let you down in the end. If you haven’t dreamed of owning your own shop, or have ambitions to create something new, then you should stay. The rule of thumb is: if you’re happy stay that way and don’t rock the boat. Happy can be hard to come by.
Today’s independent space is not for everyone. Advisors are looking at it though, and it has become a viable alternative that was not available as it is only 10 years ago. You need to be an informed consumer whose understanding starts with understanding yourself, and what you really want. The good news is that a plethora of new models and platforms arrive almost daily, which bodes well for a future independent marketplace with a rich diversity of ideas that has the potential to accommodate almost everyone.
Tony Sirianni is one of the most respected voices in the Independent space, and a tireless advocate for Advisors and RIAs. Through his firm Sirianni Strategy Group, he works with elite Advisors, RIAs, and corporations on Public Relations and Strategy. Tony was a founding partner of Steward Partners, CEO and founder of Washington Wealth Management, and an Executive Director and Complex Manager for Morgan Stanley, Smith Barney, and Legg Mason.He has a Masters in creative writing, and a JD from New York Law School.