January is one of the busier recruiting months of the year, so December is a good time to evaluate your next move. Is the allure of independence drawing you toward the RIA path or are you looking at Broker/Dealer compensation packages? In either case, negotiating financial advisor packages and bonuses is crucial. Here’s what you need to know.

Bridgemark Strategies is a leading financial advisor recruiting and consulting firm. Contact us today for help discovering and vetting new firms so you can make the best choice for your needs.

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The Elements of a Financial Advisor Recruiting Package

In this article, we’ll break down the various elements of financial advisor recruiting packages and bonus plans. These include the following:

  • Percentage of Trailing 12-Month Revenue (TTMR)
  • Breakdown and terms of TTMR Payout
  • Salary and Equity (Including RSUs)
  • Cultural Integration and Onboarding
  • Degree of Independence

Calculating Your Value Using Trailing 12-Month Revenue

Firms like Wells Fargo, Merrill Lynch, and Morgan Stanley have been known to offer recruiting packages that pay up to 300% of your trailing 12-month revenue (TTMR). That sounds like a big number, but what does it really mean?

Let’s begin by calculating the actual TTMR value. Add up your last four quarters of net revenue. Don’t include billables that aren’t received or other sources of revenue such as from loans or margin. That’s not what will be in play when you’re recruited. How much money did you actually clear from your practice last year? If that number was $1 million, your recruitment deal could be worth $3 million or more.

This is an essential first step before looking at any offers. Regional firms and IBDs like Raymond James or Stifel are offering 150% to 200% of TTMR. The RIA or Independent BD space will typically give new recruits between 10% and 70%. There are other variables in every deal, but this is a big one to consider.

Breakdown and Terms of TTMR Payout

Let’s say you’re an independent advisor with $1 million TTMR looking at a 300% deal from a firm like Wells Fargo. They’re not going to simply write you a $3 million check and welcome you aboard. That money will be paid out over time. It’s up to you to negotiate the terms of the recruiting package.

Professional athletes push for what they call “guaranteed money” frontloaded on their free agent contracts. Financial advisors should do the same. Try to get at least half of it in the first year, with additional payments spaced at intervals based on client asset transfers.

TTMR is the first of multiple “levers” you can use to negotiate a deal. If the payout terms are less than ideal for you, make sure you push for compromises in other areas. Keep your clients’ interests up front, but make sure you are compensated properly.

Payout, Salary, Platform Fees, Equity, and RSUs

Think of each of the negotiating levers in a financial advisor recruiting deal as grain silos that can be emptied or filled. When TTMR is lower, that silo no longer has the level of grain needed. You’ll need to make that up elsewhere. Luckily, you have four other silos that can provide opportunities. RIAs offer salaries. IBDs give you the ability to sell commission products. Smaller Independent firms often include equity or RSUs that vest in intervals over the course of a predetermined time period.

Don’t surrender grain in one silo without insisting another is filled. If you start planning now, you’ll know exactly what you want in terms of a deal to make a move elsewhere when you’re ready. If you don’t get the right deal, you can choose to stay where you are.

Cultural Integration and Onboarding

The “perfect” situation does not exist. If it did, we’d all be getting paid to play golf and drink Mai Tais on the beach. In every negotiation, there will be compromise. It’s possible or even likely that your final decision may not come down to numbers at all. The right fit could be cultural.

Many advisors have passed on high dollar deals from big banks and opted for more client-friendly environments at IBDs or RIAs. Transition is as difficult for clients as it is for advisors. Finding the right culture and a seamless onboarding process can ease that pain.

A visit to the home office or connecting with other advisors at the firm you’re being recruited to will tell you a lot about their culture. Don’t feel pressured to accept an offer before taking this step. It’s like buying a new home. You’ll have to live in it, so check out every room.

Putting a Value on Independence

The main reason that IBDs have become so popular in recent years is the degree of independence they offer while still giving you access to the diverse product selection that a traditional broker dealer has. That’s a powerful combination for generating revenue.

Going from the independent space to a firm like Wells Fargo or Morgan Stanley may give you added security, but you’ll be giving up your freedom to make that move. Remember that when you negotiate a deal and set your price accordingly.

The Bridgemark Strategies Difference

Bridgemark Strategies is a leading financial advisor recruitment firm, with over 80 years of collective experience. If you’re considering leaving your current firm, we can help. Through our extensive network, personalized approach, and decades of experience, we can help you find, compare, and negotiate solutions that best align with you and your clients’ goals.

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