Coronacrash Advisor Insights: 3xEquity’s Jeff Crosby & Tony Sirianni
Advisor Hub CEO Tony Sirianni recently interviewed the CEO and founder of 3xEquity, Jeff Crosby. You’ve seen 3xEquity on AdvisorHub over the years. Their recent advisor transition survey provided valuable information to advisors curious about switching firms as well as to broker-dealers who are looking to retain top talent. Jeff shares his insights into the state of transitions during the “Coronacrash.”
Jeff, a lot of people are asking, “is now a good time for advisors to consider moving?”
The short answer is “it could be.”
First, we need to acknowledge why an advisor or team MAY NOT want to move. For example: What if the advisor’s current broker-dealer (BD) really shined during COVID-19 especially compared to other BDs?
That is an interesting perspective and a different tone. Can you give me some examples how a BD may have shined?
Sure, I learned a long time ago, if the BD’s primary goal is to serve the advisor, then that allows the advisor to better serve the client and then the BD or firm’s P&L will take care of itself, not in any other order. The advisors need to be treated as the shareholders and the primary focus, if they weren’t then that would be a consideration to consider other BD’s.
What if the BD showed its leadership and support and provided the ability to seamlessly integrate a home office for the advisor, and/or provided additional resources for the advisor to better serve their clients, upped their game in the communication from the broker-dealer to the client. And in some cases, the broker-dealer might even have incentivized the advisor in different ways to help their business and their clients.
If the broker-dealer’s goal was to really help serve their advisor, like the advisor’s goal is to serve the client, then who says another broker-dealer would have done something better?
Do you think many BDs have upped their game during this crisis?
We’ve certainly heard from many advisors who would say that there are BDs who have not upped their game. Let’s also be clear about something else — it just isn’t about the BD. Has the advisor taken the necessary steps to really shine with their clients during this pandemic? The current crisis should be looked at as an incredible opportunity for the advisor and team to really dig in with their client.
Short of the advisor predicting the outcome of the market, what could the advisor have done or be doing?
I will give you three scenarios. One is more direct and the others are indirect. First, what if the advisor just did a financial plan for their client at the end of December? Do you think the client might be concerned how the market may have affected their plan with a 15% drop in their net worth three months later? Of course they are, but they probably won’t tell you. Offer to your client to redo their plan based on a low water mark of their net worth to show them they are still on track. What an incredible value add for your client. The offer in of itself helps the advisor stand out from their peers.
Second, and this is a look in the mirror gut check. How many resources or different perspectives from various financial experts have you participated in to learn more and get timely insight and perspectives from the best and brightest minds in the industry? Knowledge is power and in this unprecedented time, it requires a deeper level of commitment and understanding for the advisor to help our client. The FA needs to be confident in front of their client and not as much worried about themselves, as they should for the welfare of their clients. Again, knowledge is power.
Third, show your compassionate side. Do something for the community, donate money or raise money for a charitable cause. Let your clients see the leader you are or can be in your community.
You and your team are out there talking to advisors and different broker-dealers every day. What are you hearing in this current environment?
More than ever, we are hearing that disruption creates opportunities and opportunities exist right now for advisors looking to switch.
This might surprise you, but believe it or not, some broker-dealers as we have learned during this timeframe of volatility don’t even have real-time quotes, so an advisor doesn’t even know what the price of the market is, because they have a delayed quote. If that’s affected an advisor and their ability to service clients, we see that as a problem. During this time, we see some BD’s pulling back in their recruiting efforts and others who see it as a great opportunity to sell their value proposition and utilize the strength of their balance sheet to attract some of the best talent in the industry with some of the richest financial packages we have seen in years.
Are there financial reasons tied to the “Coronacrash” that might make timing important for an advisor?
Let’s just assume no advisor would move if it wasn’t also in the best interest of their clients. With that assumption, certain broker-dealers are being extra aggressive in this market from a financial package standpoint. Some are willing to pay a lot more up-front to get an advisor to move, and some packages are based on the back end. Let me explain.
There are broker-dealers out there that are paying big up front money based on an advisor’s T-12. If that advisor leaves nine months from now, most likely their T-12 is going to be down because of the drop in the market. Moving now versus a few months down the line could mean a difference of 100’s of thousands of dollars (if not more).
What about BDs that focus more on backend bonuses?
With some broker-dealers out there, the package is more favorable on the second, third and fourth-year of a bonus structure, and they pay on AUM, so if AUM is down 15% in this market and that’s when they move, it’s going to be based on 85% of the value of a few months ago. If the market recovers and it gets back to 100% in 12 months or 18 months and you’re getting a bonus based on the AUM that you brought over, the bonus on the back end could be super significant, in some ways, maybe even more significant than the front-end comp. If an advisor has a big AUM versus a higher T-12, that could be an incentive for the advisor. If an advisor has more of a book based on front-end annuity sales and/or commissions and yet a high AUM, the higher AUM on annuities or other businesses could be an attractive offer for the advisor with certain BDs.
For example, we have a big practice that ramped up their marketing efforts and their client acquisition is going through the roof and they want a package that can pay them more on the back end. It is a perfect deal for them and they will make a lot of money. Others may want their compensation paid on their trailing 12-month revenue/GDC.
What should the advisors be asking themselves now, and what should their expectations be going forward?
We encourage all the advisors and teams we work with that they need to move “towards an opportunity,” not from a place of work. In other words, they need to be excited and moving to something and not from something.
For the most part, all advisors are free agents. This is a great opportunity to hear what other broker-dealers are doing, to hear what other broker-dealers have done, and the opportunities that they’re creating for the new recruits coming in.
Like we said, this is a time where disruption creates opportunities, and the opportunity is to open yourself up as a free agent and really hear what other broker-dealers are offering, as I think advisors would be really surprised. Understanding you are a free agent is an important reality one needs to understand and if the advisor can move to a new BD, it is good for their client then why wouldn’t’ they move. The Parent BD would do the same.
Currently, and as I mentioned, some broker-dealers are showing their strength with their financial commitment, and some broker-dealers are shutting the doors on their recruiting efforts. That would cause me to pause and ask myself, why is the broker-dealer shutting down their recruiting efforts? Is it they don’t have the financial strength, they don’t have the bandwidth, they don’t have the ability to keep raising their bar as a successful broker-dealer or place to do business? Frankly, that would concern me if I was an FA at a current BD and they stopped recruiting. I would want my BD to recruit hard and be confident and committed in their value proposition. And for those companies that have upped their efforts.
That’s great insight — that some broker-dealers are stepping up, and some are closing the door. Would you want to share who that is?
I’d rather not differentiate between one broker-dealer or another, but I can absolutely share this with you. Some broker-dealers are being super aggressive in this market. In fact, one top broker-dealer is marketing themselves and opening up brand-new offices in strategic locations around the country and creating big opportunities there as they feel disruption is creating opportunities. We would be thrilled to talk to the advisor individually to share with them who that is and who’s separating themselves.
What can 3xEquity specifically do or offer to advisors during this time to help differentiate and understand their experience with their existing broker-dealer versus a new opportunity with a different broker-dealer?
At 3xEquity, we have the opportunity to talk to advisors’ broker-dealers every day, so we’re able to keep a real pulse on the market.
Our role isn’t to get the advisor to move for the sake of moving. Our goal is to ask the advisor, “What are your goals and are you moving in concert with your existing broker-dealer to reach your goals and the goals of your clients?” If you’re not, then we try to highlight opportunities and other situations that could best serve the advisor and their clients.
We’re not a recruiting firm, we’re a consulting firm. We’re the expert on advisor transitions with a deep team experienced in many different areas. I’ve been a 20+ year Barron’s top advisor and can really help zero in on what’s appropriate for the advisor. In some cases, it means encouraging the advisor to stay right where they are.