When it comes to switching firms, there are no best or worst moments to move.
In my experience, a financial advisor with strong client relationships can successfully make a transition whether markets are up, down or sideways. The decision to change firms is a big deal, one that at its core is about an advisor trying to fix something in their practice. He or she may want better technology and a more expansive menu of products; or they may want to capitalize on the growth of their practice or position themselves for retirement.
In good markets, the disruption of setting up shop at a new firm will initially slow your momentum, and you could lose a few new business opportunities. In bad markets, some clients may be more open to second opinions from competing advisors and may not follow you. But such fears can be overblown. For most advisors, customized, goals-based financial planning is at the heart of the services they provide. Clients rely on the steady hand of the advisor, especially in volatile markets. As long as the advisor has solid client relationships, they can successfully transition clients whenever they move.
Best day? Best hour?
Having said that, good timing plays a part in all successful ventures; moving to a new firm is no exception.
Friday afternoons and right before a long holiday weekend are popular moments to pull the trigger. That's because rival advisors are less likely to be around to call your clients. Even if they do, clients in a vacation frame of mind will probably be in no mood to respond. And on the off chance a competitor does get through, they may come off as desperate for business — or even slightly unhinged.
Whichever day you decide to leave, it's important to resign early enough so that client documents can be sent out that afternoon for clients to (hopefully) sign them right away.
Move when you're growing
Ultimately, your decision to jump ship should be tied to the growth stage of your practice and to your long- and short-term goals.
Sometimes an advisor reaches an optimal point at which to monetize their business. Their gross production is up and their business is flourishing. Advisors with these kinds of practices are perceived as growth stocks and attract the best offers. Firms offer recruiting packages based upon their view of your future revenue stream. When business is good, if there are surprises from some clients who don't come along, you are well fortified to handle any disappointments.
Move as part of your retirement strategy
Many advisors in their 50s or even 60s employ the "get paid twice" strategy. They receive a hefty signing bonus to join a new firm, and then later get compensated to hand off their book to an advisor or team of their choosing at their new venue. Although deals for shorter periods are available, wirehouse deals are for 10-year terms, so this is an optimal age range to hit the bid.
Go independent to position yourself for retirement
Some wirehouse advisors discover they relish the autonomy and control afforded by independence and establish ownership of their practices and position themselves to craft the sale price of their firms down the road. Independent advisors qualify for the more favorable capital gains treatment on the proceeds of the sale.
Sometimes an advisor will join an independent firm where they can significantly boost the multiple at which they ultimately hand off their practice. They get equity in a larger firm that will command much higher multiples when it's acquired by another firm. Instead of cashing out for two-to-three times gross revenues, they expect that an acquirer will offer multiples in the range of 12 to 15. In some cases, they are able to monetize a chunk of their revenues at a favorable multiple anytime they like once they join the new firm.
Whether it's keyed to the hour of the day or the phase of your practice, a move should be timed strategically to help you achieve your goals. It's an opportunity to build the business that you want and better serve your clients in the process.
