Independent financial professionals can wear many hats in the modern-day financial solutions business. They can be the investment advisor and/or registered representative, the HR lead, the office manager, the IT specialist, the financial planner, the insurance agent … the list goes on. Each of these roles comes with specific responsibilities and leaves the financial professional in charge of making many important business decisions on behalf of their firms, and ultimately, their clients.

One of the most challenging decisions to be made is if, and when, it’s time to change broker-dealer/RIA firms. There are many reasons a financial professional might change firms. Some of the most common include management adjustments at the BD/RIA, change in ownership of the firm, the firm’s technology being outdated, limited product selection and more. However, a top consideration that often drives this decision comes as no surprise; it’s about “the money.” Whether you call it front money, transition dollars, a recruiting package, or any other moniker, it ultimately comes down to “the amount” of “the money.”

It’s easy to understand why the amount of the money is a key factor in the decision to change to another BD/RIA firm. It’s also important to explore why making that decision based largely on the money can potentially have long-term negative effects on an independent financial professional’s business. Let’s look at some of the reasons why a BD/RIA offering industry-high amounts of money to potential new recruits may be doing so:

• First, when a firm has a great deal of access to money to offer in the recruiting process, they are often a public company or owned by private equity. In those scenarios, the firm may be driven by short-term results versus long-term value.

• Second, the firm may see the need to pay more because they lack a long-term value proposition and seek to differentiate themselves in other ways. In this case, it’s often not that they value the financial professional any more than other firms, or that they are more generous, but that they end up paying more to recruit.

• Third, firms seeking to offer industry-high packages are generally looking to maximize their profit per assets under management first. One way this might be done is by driving assets to specific platforms, which may be a platform that limits the financial professional and client’s investment options.

• Finally, public companies or those owned by private equity typically are focused on stock price and short-term growth versus long-term success and sustainability. This is where you see management and/or ownership changing often, which can lead to stress and frustration for the financial professionals.

Depending on where the financial professional is in their business lifecycle, they may end up choosing the incorrect path for their business, career development and personal income based on the money. Let’s consider some different scenarios to review the challenges that the money can create:

• First, let’s imagine the financial professional is close to retirement, for example two to four years away. If they take the money, that could end up being a smart financial decision. They may struggle through challenges and inconveniences until they sell their business, profiting twice, albeit being stressed along the way. However, what if the buyers were part of an internal succession plan—what have the successors been straddled or handcuffed to with the new firm and without any part of that compensation?

• Next, let’s consider a financial professional with a longer life cycle in the business. In this scenario, the money and the change that can occur from a transition can be a distraction to the business when compared to the firm’s future revenues.

• Lastly, for a financial professional with up to a 30-year time horizon, the money could end up amounting to that of a rounding error compared to what they could earn throughout the rest of their career. Making a decision based largely on the money can lead the financial professional to sacrifice quality and service for something that sounds appealing today, but is in reality very small in the long term. That can be a costly mistake!

The reasons for going with the money can vary depending on any individual’s personal situation. However, it is important to consider the impacts to their career and lifetime. Every independent financial professional and business owner should come to the same conclusion: go to the broker-dealer/RIA where you and your team will be the happiest, will thrive the most and experience the greatest growth. The money will come, and so will the career development, long-term value and client satisfaction that drive and inspire those who choose to be part of this noble profession.

Jeff Vivacqua is president of growth and development at Cambridge Investment Research Inc.