Changing firms can be one of the most important decisions a financial advisor can make for their business. The right move can potentially improve technology, support, economics, flexibility, and ultimately the advisor’s ability to serve clients and grow their business.
Although, all too often, advisors overlook important details during the due diligence process.
Here are five of the most common regrets advisors have after changing firms.
1. They Didn’t Spend Enough Time Evaluating the Technology
Technology is usually part of every firm’s recruiting process, but a one-hour demonstration rarely tells you what it will actually be like to operate your business on that platform.
Advisors should look beyond a basic overview of the CRM, trading system, financial planning software, and other tools.
Ask yourself:
- How well do the systems integrate?
- How much will your current workflow change?
- What technology is proprietary versus third-party?
- Are there limitations that could affect your business?
- How easy is it for your staff to use?
- What will change in the client experience?
- How quick is the process to set up new accounts?
- How efficient is the rebalancing tool?
*We help advisors customize technology questions based on their specific needs/concerns.
If you have an assistant or operations professional who works closely with these systems, include them in the due diligence process. They may identify additional questions or workflow issues specific to your business.
Technology can dramatically improve your practice, but the wrong technology fit can create frustration almost immediately after a transition.
2. They Overestimated the Firm’s Service and Support
Nearly every firm will tell you it provides excellent advisor support.
The more important question is: What does that support actually look like once you are there?
Before joining a firm, investigate things such as response times, staffing levels, back-office experience, average employee tenure, and the advisor-to-staff ratio.
Most importantly, speak with advisors who already work with the broker dealer or RIA.
Do not rely solely on recruiters, management, or carefully selected references. Try to find advisors independently and ask them about their experience.
How quickly are problems resolved? How long are hold times? Are knowledgeable people available when an advisor has an urgent issue? Has service improved or declined as the firm has grown?
Back-office support can have a major impact on both advisor productivity and the client experience, so this is an area worth investigating carefully.
3. They Underestimated the Difficulty of the Transition
There is no way around it,changing firms takes work.
A good transition team can make the process significantly easier, but advisors should be cautious of anyone who portrays a transition as simply flipping a switch and going back to business as usual.
There are clients to contact, accounts to move, paperwork to complete, technology to learn, staff to coordinate, and details that need to be managed.
The firms that handle transitions best generally have a well-defined process and clearly establish responsibilities before the advisor moves.
Before committing, understand:
- Who is responsible for each part of the transition?
- What support will be available before, during, and after the move?
- How are client accounts tracked throughout the process?
- How quickly are problems escalated and resolved?
- What resources will be dedicated specifically to your transition?
A realistic understanding of the process allows you to prepare properly and greatly increases the odds of a smoother transition.
4. They Didn’t Fully Understand the Contract
An advisor may assume that becoming independent means having complete freedom to operate the business however they choose. Depending on the structure, that may not always be the case.
The agreement could contain provisions involving ownership of clients including non competes, restrictive covenants, restrictiveness on branding and technology.
We have seen advisors become unhappy with a firm and then discover that leaving the relationship is much more complicated than they anticipated because they did not fully understand the agreement before joining.
Before signing anything, make sure you understand exactly what you are agreeing to, including what happens if the relationship does not work out.
5. Not fully understanding the economics
A firm’s payout is easy to understand, but the full economics of the relationship can be much more complicated. An attractive payout can quickly look different once additional expenses are included.
Depending on the firm and business model, advisors may encounter costs associated with:
- Advisory admin or platform fees
- Technology
- Administrative services
- Errors and omissions insurance
- Directly held account fees
- Ticket charges
- Sipc
- Audit costs
- Compliance or other platform fees
Some of these expenses may not exist at an advisor’s current firm, which makes them easy to overlook during the recruiting process.
Instead of asking, “What is my payout?”, advisors should ask for a proforma with their net income.
At Cross-Search, we help advisors understand the differences between firms, identify opportunities they may not know exist, and conduct the due diligence necessary to make a more informed decision.
If you are considering changing firms, or simply want to understand what options may be available to you, we would be happy to have a confidential conversation.
