Unlocking Real Value Blog

What Are the Risks of a Wirehouse-to-Regional Move?

Published in  FUNDfire – An Information Service of Money-Media, a Financial Times Company
Written by Andy Klausner, CIMA, CIS, founder of AK Advisory Partners LLC., a strategic consultancy serving the wealth management industry.

The market turmoil of the past year has certainly benefited the recruiting efforts of many regional firms at the expense of the wirehouses. In fact, many regionals have alreadysurpassed their annual recruiting goals. For regional firms, what was once a disadvantage in recruiting advisors – having to explain to clients who you are – has turned into an advantage as shell-shocked advisors look to escape the bad publicity of the wirehouses.

But advisors who are interested in moving from a wirehouse to a regional need to do so with their eyes wide open. Moving is never easy and the grass is never as green as you think. I am not taking sides on which type of firm is better; remember that in many cases, an individual advisor’s success and fit with a firm is specific to his or her personality, and the firm’s ability to support their client base. However, there are a few items that advisors contemplating this move should consider and factor into their decision-making process:

  • Product development. Wirehouses have traditionally introduced products sooner than regional firms, in many cases by several years. While the firm that you are being recruited by will try to accommodate your business and add investment platforms to accommodate you, be realistic in your assumptions. Remember that at a regional, differences may exist in how much of this will happen, how quickly and how the quality will compare.
  • Service. Regional firms have traditionally been able to “sell” the fact that you will be a bigger fish in a smaller pond. They have been able to convey how the advisor will receive more personalized service and have access to the firm’s top executives and support staff. You should confirm that the recent market crash has not resulted in staff reductions that will cancel out this benefit.
  • Culture. Mergers among the wirehouses have undoubtedly changed many cultures. If the regional firm you are considering is independent, you need to remember that further overall industry consolidation is likely. Consider, too, that it’s not out of line for the trends of a few years ago to reappear.
  • Technology. Historically, wirehouse have had a large advantage in technology. Their IT budgets are larger as are their internal staffs. This has made their product development and enhancement initiatives more efficient and timely.In a case where the regional has been purchased or merged in the recent past, ask questions about the senior management. In these circumstances you will probably hear thateven though the firm has been purchased by another regional firm, the management is intact and the firm has been left alone. You need to consider what happens when these executives retire or leave. Keep in mind that the likely succession will include more day-to-day involvement by the parent company.

For all of these issues, it is important to take the long-term view. Contemplate what might change in each of the above areas over the next one to five years and how such changes might impact your business, your clients and your quality of life. By doing so, you make the decision with your eyes wide open. You will not be overly influenced by current negative events at your present firm or by over-enthusiasm garnered from the people recruiting you.

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