Should You Switch Firms? Straight Talk From a Top Advisor Recruiter

Though there’s fierce competition for top advisors, to remain with your current firm or leave for another is still a tricky decision — and deep due diligence is in order.

“Transition deals being offered [by wirehouses] are huge,” says Mindy Diamond, CEO of Diamond Consulting, a leading recruiter of financial advisors, in an interview with ThinkAdvisor. ”The number of options that a high-quality advisor can consider is more robust than ever before. So if a firm wants to recruit, they need to pay up.”

Many independent broker-dealers, regionals and RIAs are offering extremely sweet deals too.

In Diamond’s new book, “Should I Stay or Should I Go?” she covers everything from “Critical Questions You Should Ask Yourself” to “The Economics and the Negotiation Process.”

In the interview, she unpacks do’s and don’ts. For example, “It’s not enough to put the deal in writing. The onus is on the advisor” to conduct thorough due diligence.

And: “It should be an absolutely stealth operation. If your firm finds out you’re looking elsewhere, you’re jeopardizing your position,” she warns.

Host of “The Diamond Podcast for Financial Advisors,” the veteran recruiter also explains the transition strategy of “shrink to grow.”

“If you don’t have the willingness to lose a certain amount of clients … you probably don’t have the risk appetite to move at all,” Diamond maintains.

Here are excerpts from our interview:

THINKADVISOR: You write that there’s hot competition among wirehouses to make the biggest pay deals with advisors. Please elaborate.

Transition deals being offered are huge. The number of options that a high-quality advisor can consider is more robust than ever before. So if a firm wants to recruit, they need to pay up.

Many independent broker-dealers and RIAs pay transition money, not as much as the wirehouses but enough to make it attractive.

The independent space has expanded exponentially. And these firms are all legitimate options for advisors.

What prompts an advisor to change firms?

Ninety-nine times out of a hundred, advisors are quality people who want to make sure they get a good deal.

And they’re moving for the right reasons. They’re limited: They want better client service, to grow faster — things they’re not able to [get] now.

What’s the most important change among advisors that’s occurred in the last couple of years?

Especially among top advisors, it’s that they view their [practice] as a business with business enterprise value.

It used to be when they worked at, say, Merrill or Morgan Stanley, they [felt they were] a Merrill advisor or a Morgan advisor. They didn’t have the feeling that they owned their business.

What if an advisory operates on a small scale managing a low level of assets — is that considered a business enterprise?

No matter how much revenue you generate and how many clients you have, you’ve built a business that has value.

As a fiduciary, you have the responsibility to make sure you have access to everything they need and deserve.

You have a responsibility to yourself to make sure you’re set up in the best possible way to maximize the business for [your successor].

What about solo independent planners who interact with clients online only and have low AUM? Does that operation have business enterprise value too?

Definitely. If you really care about your clients and the value of what you’re building, even the most unsophisticated business has value.

What are common mistakes advisors make in leaving one firm to go to another?

First, it should absolutely be a stealth operation. If you’re exploring while you’re employed by a firm, you certainly don’t want to do anything to jeopardize your status within the firm.

What if your company discovers you’re looking around?

You’re jeopardizing your position because as an employee, the firm has the right to terminate you.

It’s not that exploring elsewhere is a terminable offense. But technically, if you’re a fiduciary employed by a firm, you definitely do not want that firm to find out you’re looking because they can put you under a microscope and find a reason to terminate you.