Transitioning to a new firm has its share of challenges. Leaving the familiar to venture into the unknown is always difficult, so it’s best to do some homework prior to making a move. An analytical approach is recommended. When it comes to the financials of an opportunity, advisor payouts are important—but they are not the only factor to consider. In todays’ article, we’ve broken down some of the key financial factors that you should consider when comparing financial advisor opportunities.
At Bridgemark Strategies, we are leading financial advisor recruiters and consultants serving Financial Advisors, RIAs, and Broker/Dealers nationwide. If you’re considering a transition, we can leverage our vast network and experience to help you discover and vet new firms so you can make the best choice for your needs. Contact Us
Platform Fees
In this era of no-fee trading, it’s easy to overlook platform fees as part of your evaluation criteria. Don’t make that mistake. Trading equities and ETFs through your custodian is one thing. Buying and selling mutual funds, commodities, and futures is something else entirely. Find out what it will cost you to do that.
Trading Frequency
Time is money. If you’re spending all your time trading, there are fewer opportunities for prospecting and client meetings. Ask about expectations and portfolio modeling. Using third-party managed portfolios gives you more time to build your client base. High volume trading is more time consuming.
Production Bonuses
Salaries and commissions are wonderful. Production bonuses, however, can make the difference between mass affluence and high net worth for a financial advisor. Ask if there’s a production bonus model for the firm you’re looking to transition too. These are typically not as lucrative as they were in years past, but they are still significant.
Product Selection
Product selection is one of the more common reasons why financial advisors transition to a new firm. It’s of course dependent upon licensing, but if you’re qualified to sell commissionable products, does the firm you’re evaluating offer an opportunity to do that? If so, what does the compensation structure look like?
Client Fees
A client fee structure that’s not competitive will hinder your efforts to grow your book of business. Flat fee structures are popular with financial planners. Asset managers generally prefer tiered billing models targeting HNW and UHNW prospects. Client fees affect your compensation model, so ask lots of questions on this point.
Client Acquisition Costs
Some firms cover all the marketing costs, so the only thing you have to do is close the deal. Others require that you come up with your own client acquisition strategy. What will that cost you, and is the firm prepared to compensate you for marketing efforts? This is often a deal breaker for transitioning advisors.
Transition Money
There are more financial advisors retiring than there are entering the field. That gives you a clear advantage when negotiating a deal to make a transition. Don’t limit yourself to broker dealers or independents. Many of the hybrids like LPL are offering significant transition money to move to their platform.
Number of Advisors
Being a big fish in a small pond can have its advantages, but only if you’ve honed your skills to deserve that position. Newer advisors can benefit from a larger advisor pool. There are more people to learn from. Established FAs may want a bigger piece of the pie. Honestly assess where you’re at personally before deciding.
Profitability of Business Model
Moving to a new firm puts you in a position where you need to embrace their business model. Is that something you can live with? Financial advisors tend to be independent, even when working for others. The business model has to be a match for you.
Final Thoughts
Each of these financial metrics can be quantified with a number that will provide you an expectation of what to expect in your first year at a new firm. Finding the right solution can ensure profitability for years to come. The financial aspect of an opportunity should not be overlooked. Getting paid well is one of the perks of being a financial advisor.
Yes, it’s about the money, but that’s not the only thing that’s important. In our experience, Financials is often one of the least important factors to compare when vetting opportunities. Other factors need to be examined as well, such as Feel and Fit.
At Bridgemark Strategies, we are leading financial advisor recruiters and consultants serving Financial Advisors, RIAs, and Broker/Dealers nationwide. If you’re considering a transition, we can leverage our vast network and experience to help you discover and vet new firms so you can make the best choice for your needs. Contact Us