Financial Advisor IQ – Advisor vs. Firm: If You Switch, Where Do Clients Go?

March 2017

By Grace Williams – March 21, 2017
Hopefully, you’re a confident advisor, but if you jumped ship and switched firms tomorrow, would your clients stick with you or the firm? How would you even go about knowing? For a deep dive into the battle of advisors versus firms, consultancy Spectrem Group sought to tap into clients’ mindsets on this very topic.
Spectrem used information from an online panel of 3,000 respondents with a net worth of over $100,000 excluding their primary residence. The overall promising news is that clients prize their advisor relationships. In fact, they trust their advisor more than a personal attorney or accountant. Moreover, their trust is on par with that of a primary care doctor, according to Spectrem. So the advisor who’s been an indispensable resource and a solid communicator could find that their clients are more likely to port over with them to the new gig.
One reason clients prefer to stick with their trusted advisor is because first and foremost, human nature always wins out. We are averse to the hassle and potential speed bumps that come alongside change, and financial clients are no exception, according to Spectrem. Some 38% of high net worth respondents reported they had been with a primary advisor for at least three to 10 years. Nearly a quarter had been with their advisor for a minimum of 15 years, and, perhaps not surprisingly, the length of time a client spent with their advisor tends to grow with the client’s age.
Sam DeGennaro is a senior partner and managing director at Snowden Lane Partners. DeGennaro, whose New Haven, Conn. office manages approximately $1 billion total in client assets, joined Snowden in July 2016 following a long-time career at Merrill Lynch. When he made the switch, DeGennaro says he also ported over a vast majority of his clients from the wirehouse.
For DeGennaro, his client relationships and the decision to be honest about moving firms made the conversation easier.
“Clients want to know their needs are being addressed first,” he says in an interview with FA-IQ. “And as long as we were positioned that way, there wasn’t as big of a hurdle.”
DeGennaro’s decision to be upfront played directly into soothing clients’ potential nerves. According to Spectrem, 28% of respondents prioritized their perception that their advisor is “honest and trustworthy” as a top criteria when choosing a new advisor. Meanwhile, a top trust factor for 81% of men and 84% of women is an advisor who looks out for their best interest.
Clients “made the move because of me clearly, which felt great,” he says. “They had to have some assurances about why I was moving and what it would mean to them.”
Much of what drives an advisor to move firms can be attributed to entrepreneurial pursuits and quality of life. Matt Cooper, president of Beacon Pointe Wealth Advisors and president of Beacon Pointe Advisors Private Client Services, has had a few advisors join the firm recently with robust follow rates.
From an ownership-management standpoint, Cooper – whose Newport Beach, Calif.-based firm manages a combined total of $10 billion in assets alongside its affiliates – says a surefire way to keep all parties satisfied is to follow a pretty simple rule of thumb. “Take care of the employees” — by ensuring advisors have the right tools to be successful, are compensated correctly and feel appreciated — “and they’ll take care of the clients,” he says.
However, advising can’t always be fun, games and singing Kumbaya around a campfire. There is still a fine line firms and advisors must navigate to ensure an advisor has autonomy while simultaneously reinforcing the firm’s mission. At Beacon Pointe, the solution is a threefold system where clients are assigned a senior wealth advisor, a junior wealth advisor and a business development advisor. By assigning three team members to the client, the firm covers the client from multiple angles.
At Beacon Pointe, the firm had to “pinpoint the difference between how deep the relationship is with the client and the advisor and who owns it,” says Cooper, noting that a solid relationship with the client, advisor and firm is a sound strategy.
All told, according to Spectrem, a client’s loyalty to an advisor comes down to the connection and personal service they receive. “The more connected an investor feels,” writes Spectrem, “the more likely they will choose [the] relationship with their advisor over the comfort level of staying with their financial firm.”