I have watched the conflicts that can arise from these accelerators first-hand. Recruiters are tempted to focus 100% of their outreach on those firms who are paying much higher fees. This results in firms that may be a perfect fit for the advisor candidates, not even getting the chance to meet them. This fee structure also eliminates small broker-dealers, RIA's, and OSJ's from being able to compete for the business based on their value proposition because they simply can't afford the fees.
The Answer Is A Flat Fee Model
The argument for a flat fee recruitment model is about upholding our fiduciary duty as recruiters. Similar to the broker who puts their clients into a front-loaded investment product based on commission, recruiters placing their clients at a firm that pays the highest price is a major conflict of interest.
When we adopt a flat fee recruitment model, we eliminate prejudice towards firms that are paying higher fees for recruiting. The flat fee allows for any firm that is interested in attracting advisors to calculate their recruiting goals against fixed fees. This means that advisors and firms will come together based solely on the fit.
How can firms still compete with one another? This is a question that often comes up, and the answer is, by lowering recruiting fees, firms can provide more money to the advisor in a transition package or re-invest those savings into their organizations to better support their future advisors and their clients. This is a value-add to the advisor, not to the recruiter.
Flat fees also create 100% transparency during the recruitment process and reinforce trust between the advisor, the recruiter, and the firm.
Is Your Recruiter Operating In Your Best Interest?
While there is a lack of transparency for most traditional, third-party recruitment firms, advisors can come equipped with questions that will help them determine if the recruiter is working in their best interest.
These questions include:
• How many firms will you assess on my behalf?
• How much do these firms pay you?
• Do you conduct due diligence that is unique to me and my needs, or do you use a one-fit-all approach?
• How many advisors do you help evaluate transitions for each year?
• How involved are you in the transition process?
• Do you help me compare my options and evaluate them with me? How?
• Will you help me engage with legal representation if I need it? If so, do you get paid for the referral to this legal team?
• Do you do any risk analysis with me to help determine if I should create my own independent firm?
I’m confident that the days of opaque business practices and conflict-ridden fees are coming to a close. In today’s digital environment, it is both risky and bad for business, for recruiters to operate with anything other than 100% transparency. And I believe that the first step is flat fee pricing.
Ryan Shanks is founder and CEO of FA Match, a digital recruitment platform that connects experienced advisors with financial services firms equipped to help them thrive. Ryan brings over 20 years of experience as a recruiter and “sports agent” to financial advisors. Learn more at www.famatch.com.