Wirehouses Go Big With Recruiting Deals; Three Key Strategies For Advisors Wanting In

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There has been a flurry of recruiting activity as of late in financial services as wirehouse and other W-2 firms have ramped up recruiting activities. The primary focus, as evidenced in numerous daily media headlines regarding advisor moves, has been on large teams or advisors with significant books of business totaling in the millions – if not billions – of dollars. So why the sudden push by wirehouse and W-2 firms to ramp up their recruiting efforts? The answer is a simple one and it comes down to basic economics.

The COVID-19 crisis pummeled the profit and loss statements of all of the major wirehouse firms throughout Q2, leaving much ground left for them to gain if they are to end 2020 with any positive – if not steady – numbers on their balance sheets. One of the most tried and true methods of adding assets to the balance sheet for wirehouses has always been acquisition and it is no surprise that these firms are turning to this strategy again. By using recruiting measures to acquire large teams or advisors with significant AUM, wirehouse and other W-2 firms give a fast injection of capital to balance sheets in need. In the current market, with recruiting competition strong, wirehouses are pulling out all the stops to achieve this goal offering extremely competitive and financially lucrative recruiting packages to top teams and advisor prospects.

Which begs the question, how does an advisor evaluate the growing recruiting opportunity for the benefit of themselves, their practice, and their clients? Three simple strategies hold the key to charting the right course when considering the bevy of recruiting packages on offer:

1) Know who you are as an advisor and what your goals are for your practice.
It is tempting in recruiting climates such as we are experiencing now to focus on the money. After all, in many cases if you have a large book of business the wirehouse and W-2 firms will be willing to offer you a lot of money. However, money cannot and should not be your driving decision factor. If you are an advisor or team considering a transition to wirehouse or W-2 firm, you need to also take into account the prospective firm’s culture, technology assets, business operations, compliance support, and marketing resources. Ultimately, you will want to find synergies between what the prospective firm partner is offering you and your own vision for your advisory practice. This is the only way to insure not just a successful transition, but a true partnership that carries on for years to come.

2) Have a clear vision of your end-game.
Advisors and teams receiving the most attention from wirehouse and W-2 firms have built significant books of business. Whether you are an advisor in your prime, or an older advisor with retirement on the horizon, making a transition to another firm is a prime opportunity to consider succession options. Advisors in the mid-stage of their career will want to evaluate the opportunities a new firm partner may present for growing their book of business through internal succession and sunsetting programs. An older advisor should view a transition as an opportunity to capitalize on their well-established book of business by utilizing a strategy I refer to as dual-monetization ™. Dual-monetization ™ is a potentially lucrative strategy as it allows an advisor to capitalize on both transition and succession bonuses. The key take-away is that you do evaluate succession options as part of your decision making process in a transition. It is a step many an advisor or team forgets and yet it can have a significant impact on any money you might be leaving on the table in a transition deal.

3) Do not choose to go it alone when evaluating a transition opportunity.
Seeking the trusted council of a recruiting and transition consulting firm, particularly during a hot recruiting market, is advisable to any advisor or team looking to make a move. The best consultants are firm agnostic and should have the depth of industry experience and contacts to not just give you practical guidance about making a transition but to also handle the nuances of negotiations to make sure your transition is an ideally suited match for both you and your new firm partner. Transition deals are complex by nature and consultants in the field are well-versed at cutting through the clutter in order to give you the insight you need to make the right transition decision – both financially, operationally, and philosophically – for you, your practice, and your future.

Times of transition are times of evaluation. The current year has certainly been a time of transition for the financial services industry as a whole and the current recruiting push by wirehouse and W-2 firms is bringing that same time of transition home to roost for many advisors and teams. If you are considering your next move, take a step back, look past the money, and envision what you want the future of your practice to look like. Significant opportunity can be achieved in today’s recruiting market, though understanding what that opportunity looks like for your firm and for you as an advisor is a key only you have.

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