When advisors consider moving to a new broker-dealer, they must weigh the cultural fit and services of the firm they’ve got their eye on more than just the financial incentives that have prompted them to move.

That means considering the feel and financials of any broker-dealer trying to recruit them, says Jeff Nash, CEO and founder of BridgeMark Strategies, a coaching and consulting firm in Charlotte, N.C. Before founding BridgeMark, Nash was a senior in-house recruiter at LPL Financial.

“Firms need to look at the ‘feel’ of a broker-dealer they are considering joining, which includes whether the two firms are aligned on their future goals,” Nash says. “Then they should consider the ‘fit,’ which is the products and services the two offer. And finally, they need to weigh the financial incentives”—which can include things like forgivable loans and up-front payments. “Advisors get wooed by the financials in an offer. Then three years later they realize they are miserable when the proper ‘feel’ and ‘fit’ are not there, and they want to make another change.”

The aggressive recruiting environment, with aggressive incentive packages, currently gives the edge to financial advisors, especially those who want to move. And Nash says this situation will likely continue at least through the end of the year. But the offers have to be weighed against how well an advisory and its new broker-dealer will mesh.

David Fischer, co-founder of the Independent Financial Group, a midsize independent broker-dealer based in San Diego, says his firm “is not caught up in the war of writing checks” and has done very well in the current market. The firm now has 650 advisors affiliated with it, and is one of the youngest and fastest growing independent broker-dealers in the financial industry.

“We’ve seen advisory firms that have a lot of turnover issues, so we decided we want to help the advisors realize their true vision and eliminate some of those issues. In the last three to five years, 95% of our advisors have come from wirehouses or big firms. They are looking for an independent culture in the fee-based arena, not just money,” Fischer says.

His company attracts advisories in need of a succession plan, as well as those that want to grow, he says. The firm had $257 million in revenue last year and is on track to have $300 million by the end of this year.

Such midsize broker-dealers are facing deep-pocketed giants, of course, including LPL Financial, which has nearly 21,000 financial advisors and approximately 1,100 institution-based investment programs. The firm also affiliates with approximately 500 independent RIA firms nationwide.

LPL has beefed up its wealth management capabilities and service capabilities in the last few years to better service its advisory firms, says Scott Posner, executive vice president of business development. The pandemic slowed the movement of advisors from one channel to another and from one broker-dealer to another for a time. Before the pandemic, advisor movement industry-wide averaged 6.8% a year, but that has slowed to 5.8%, Posner says, both because of the impact of Covid and the current market unrest and rising interest rates. Advisor movement to LPL has actually increased and Posner adds that a continued recovery is expected.

LPL, like many other broker-dealers, no longer likes to think of itself as a broker-dealer but instead as a wealth management firm. That shift in terminology has happened throughout the industry as broker-dealers seek to reimagine their businesses beyond transaction services.

“We have been creating different ways that advisors can join us, so we think of ourselves as a wealth management firm now,” Posner says. “Firms could join us as a 1099 firm [an independent contractor] or as a 1099 firm with some support. Then about a year and a half ago we added the capability of firms to join us as a W-2 advisor [in other words, as an employee], but in a way that they are still independent.”

LPL Financial supports all advisor business models, from fee-only firms to those that are fee and commission combined. The firm has long targeted wirehouse advisors who want to be independent contractors. Its basic value proposition is that it will handle chores they don’t want to.

“We continue to create new affiliation models to suit all types of firms from high-growth to those that are more mature,” Posner adds. “It’s hard to be a small or midsize firm in the wealth management space. You need to have the resources to support advisors.”

Many wirehouse brokers enjoy the security and benefits of a big company while others are attracted to the idea of independence. Doug Ketterer, CEO and founding partner of Atria Wealth Solutions, a wealth management company headquartered in New York City, agreed that the money is often not the first priority for advisors who are moving. “Going independent is not for everyone, but it is a solution for financial advisors looking to control their own destinies,” Ketterer says. “Independence means they can interact with their clients in their own ways.”

The barriers to going independent can be big, he says, but the job of an independent broker-dealer is to make the transition easier. In many ways the pandemic was a catalyst and an accelerant for the transition conversation. “The big firms sent everyone home when it started, and advisors realized they can do this on their own,” Ketterer says. “Everything had been done for the advisor in the past, but they did not truly own their client relationships.”

There are a lot of moving parts to control once an advisor decides to declare his or her independence. That’s where broker-dealers can help.

At Atria, two programs have been developed to help ease the transition pains. “Team Assist” handles the logistics of creating a new firm, and “Tech in a Box” provides the technology that today’s advisors require. “Covid reinforced the power that technology can provide in running an office,” Ketterer says. “It is an enabler, not a replacement for the advisor. The advisor is the one delivering the advice—he or she is the constant in the equation.

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