What Price Loyalty?
Authored by: Jeff Nash, Founder & CEO, Bridgemark Strategies
JD Power research says between 30 – 40% of advisors not near retirement indicate they may leave their current firm in the next 1 to 2 years (figures vary by channel). This phenomena is not limited to financial services, as workplace expectations have morphed over time across industries. Gone are the days employees stayed at one firm throughout their work lives: the “company man (and woman)” has given way to a “free agent” movement.
It is a trend that, when combined with the historically high dropout rate among new financial advisors (over 70% leave the industry within five years of joining, according to Cerulli), and projections that upwards of 50% of financial advisors will retire in the next 10 years, makes for fierce competition for talent among firms.
In an industry often described as dynamic, no doubt wealth management enterprises would welcome less activity on the attrition front – particularly the wirehouses that have seen big increases in advisors breaking away in favor of independence.
On the independent side, firms court advisors with flexibility, control, robust platforms and promises of shared vision, values and community. However, recent mega-deals that saw firms’ ownership choose cash over culture left many advisors feeling as if they’d been sold out.
The loyalty many advisors feel toward their firms is not always reciprocated.
The very framework of the independent model puts entrepreneurial advisors in control of their destiny … including the firms they choose to partner with.
Do wirehouses have an expectation of loyalty from their advisors? I believe they do. But have they earned it?
Advisors have told me the calls just stop the day they gave notice.
All firms have great expectations of advisor loyalty and nurture it through recognition programs, tiered service offerings and seats on advisory boards. When rebuffed, some firms are not above weaponizing an advisor’s perceived allegiance to drive a change of heart or demonstrate distain for their “treachery.” When this happens, it does little more than validate that the advisor’s internal “go” signal was worth heeding.
Self-interest is not a character flaw
Advisor retention is important to firms operating in both the independent and wirehouse channels. That is why it is important for wealth management firms to realize advisor loyalty is only as strong as the business relationships nurtured with advisors. When an advisor recognizes that their business’ health and/or personal aspirations do not align with their current situation, they should look elsewhere.
Current trends in wealth management, including consolidation, aggregation and the growing presence of private equity have altered the industry landscape. The evolution of the space has spurred advisors to reflect upon their circumstances and ensure they are well positioned to capitalize on shifts in the industry, both for themselves and their clients.
Many veteran financial advisors, who have quietly and effectively built outstanding books of business over the years, who have been good team players and not complainers, who consistently produce without drama, are now considering their options. Loyalty to your workplace has its limits. Loyalty to your family, clients, staff and yourself has a much longer runway.
As an advisor, how can you better contextualize your situation? Start by removing the emotion and seeing what’s left. Draw a line between your current situation and what you want your future one to be. If that line is full of twists, turns and unknown steps, it may be time to consider a move.
Leveraging the expertise of an independent and objective consultant to help define your expectations, explore your options and help you land where you belong is an important first step to finding a new home with the best Feel, Fit Financials™ for your situation.
