Slideshow Why are so many advisors switching firms?

Published
  • April 09 2018, 1:32am EDT
10 Images Total

<br>

Financial advisors clearly have a roving eye.

Nearly a quarter have switched firms in the past five years and more than half have considered making a move, according to a new Fidelity study, "What's Driving Advisors to Move in the New Market Landscape?"

Most of the movement is toward RIAs and IBDs, the study found, driven by what it describes as "a desire for growth opportunities, greater autonomy and ability to deliver a higher level of client service."

Money, of course, is also a motivating factor.

"A better level of service means a happier client, and a happier client means a better [financial] outcome for the advisor," says Charlie Phelan, vice president, practice management and consulting for Fidelity.

Teams switching firms together has been a major trend over the last five years — almost half of the advisors who moved were part of a team. As a result, the median assets moving to a new firm with a financial advisor or a team is now around $75 million, more than double the amount that transitioned in 2012.

Recruiters who want to persuade advisors to move should have different targeted messages, says Phelan. "For some it's the emotional benefits of greater control," he says. "For others it's increased earnings potential and an opportunity to grow."

Firms need to offer detailed transition process and integrated technology platforms, according to the study, while companies who want advisors to stay must demonstrate "a really good environment and culture," Phelan says.

Interestingly, top executives in wealth management, asset management and fintech firms are staying put, according to a new survey.

But expect continued movement from advisors, says Amit Dogra, president of Third Seven Capital Advisors in New York.

"It doesn't matter if you're at an RIA, an IBD or a wirehouse," Dogra says. "Advisors want more and expect more. They want a commitment that they won't be replaced by technology, that they can be excited by investing again and that they'll have value added to their business no matter where they are in their life cycle."

Advisors who have moved want to grow their practice and work independently, according to Fidelity's survey. Those sitting on the fence are worried about financial success, concerned that clients won't follow and that they won't get adequate transitional support.

Entrenched advisors say they like their current jobs and don't want to market themselves in a new job and develop new business. They also are happy with their work/life balance and worry they will have to work more hours if they move.

Content Continues Below


"The increased AUM transfers are likely due in part to the increased movement of teams that we are seeing," says Charlie Phelan, vice president of practice management and consulting for Fidelity.

"This is a trend that's really been growing in popularity," says Phelan. "One reason is the enormous inter-generational wealth transfer. You're seeing a lot of junior and senior advisors teaming up, as well as a specialist in an area like portfolio management with a financial planner."

Going to an independent firm appeals to advisors who are "looking for the freedom to realize their unique visions for their businesses," says Tricia Haskins, vice president, practice management and consulting for Fidelity. "They believe this will result in greater opportunities for growth."

Content Continues Below


"We know that fear of the unknown is a big concern for movers, and moving to an established business can help to alleviate some of that anxiety," says Haskins. "Having things like a technology stack and standard processes already in place at an established firm can make it easier for the advisor to jump right into servicing clients."

One survey respondent said it was important to be able to reach out to colleagues who had already switched firms to ask, "How did you do it? What worked? What didn't work?"

Despite their initial worries, nearly a third of the RIA survey respondents who had moved said that none of their concerns ended up being significant issues.

Content Continues Below


Despite their difficulties, advisors who moved to an independent firm also experienced some pleasant surprises. More than a third wished they had made the move sooner and 26% of those surveyed said they didn't realize how much better things would be after they transitioned.

"There's a growing awareness of what the Broker Protocol is, and advisors are taking it into consideration when deciding whether to make a move," says Phelan.