While the bank channel offers a great way to start a career, there are some real limitations when it comes to who “owns” the clients.
Many young advisors start their careers in wealth management at bank branches—roles which often come complete with a steady flow of referrals. It’s a great place to launch a career as it provides a way to learn the ropes and build a book of business.
Yet it’s important to understand that along with all the early potential comes some strong restrictions – because banks view the clients they refer to advisors as owned by the institution – an issue that is of particular concern for advisors who may want to change firms down the road.
Take “Greg” for example, a 32-year old advisor who started his career at a bank branch 10 years ago. While he’s happy that the bank has enabled him to build a career and grow his business to $400mm in assets, he’s feeling the pain of limitations in his ability to take his business – and career – to the next level. In the recent past, Greg developed a strong relationship with a prominent law firm in town that could serve as a powerful center of influence and referrer of a more affluent client base. But this attorney and his wealthy clients are clear that they don’t want to work with a “bank broker.”
In our conversation, Greg shared that at just 22 years of age, he was eager to join the bank because he would have the opportunity to partner with private and commercial bankers and be the recipient of their wealth management referrals. At the time, paying little attention to the details, he signed an employment agreement that contained a strict non-solicit provision.
Greg realizes now that in blindly signing on the dotted line a decade ago, he was agreeing to several provisions that will restrict his growth, optionality and portability.
He has a decision to make, and it comes down to where he believes his career will be best served: staying at the bank or cutting the cord, risking the loss of some clients—and taking that proverbial step backward in order to move forward.
From our perspective, Greg is young, has a long runway to the end of his career, and the potential for tremendous growth. While taking a step back is scary, he might be wise to do just that.
While any advisor worries about client portability when considering a change in firms, bank advisors in fact may have more reason to worry. Not only can banks be fierce protectors of their assets, but many clients like the “all under one roof” access that a bank brokerage provides.
Any advisor considering a move must do an honest self-assessment to determine how much of his book is really portable. That is, evaluating whether there are enough clients that would move with him to make it worthwhile—even if it means they don’t all follow.
Bank advisors like Greg who have reached a crossroads in their career have 3 alternatives to consider:
- Move to another bank. A more bespoke private bank may offer a stronger platform appealing to an affluent client base, and even a more robust referral source—but it’s a decision that needs to make sense not only for the short-term, but for the longer-term as well.
- Move to a traditional brokerage firm. A wirehouse or regional firm will offer a recruiting deal, as well as the platform and integrated solution set which may be more suitable for a high net worth client base.
- Go independent. Going independent, either by building one’s own firm or joining an established one, would offer the greatest freedom, flexibility and control. Plus, there’s a whole cottage industry that’s been born to support breakaway advisors.
In the case of a bank advisor, the likelihood of leaving some chips on the table makes it even more important to ensure that his confidence-level and risk-appetite can withstand moving the business with a smaller asset base—and that ultimately, a change will be needle-moving enough to make it worthwhile. If not, he can certainly choose to stay the course.
So, it comes down to answering the threshold question: Are you willing to take a step backward to make a big leap forward?
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