If your motivation for a move is just about the transition money, you – and your clients – may end up short-changed.
With record transition packages being offered to incent the changing of firms, advisors are moving at a record pace. Certainly, it is tempting to be wooed by these crazy deals that have the potential to turn someone with an average net worth into a wealthy man or woman. But, when the motivation for such a move is being driven solely by personal financial gain, the long-range outcome can be disastrous. Here’s why:
Whether you are currently held to the fiduciary or suitability standard , your clients trust that you are acting in their best interest—always. If monetizing your business is the only reason for changing jerseys, you risk breaching that sacred covenant. Clients will always be able to “sniff out” an advisor whose motivation is rooted in his own best interests, instead of those of his clients. You put yourself at greater risk of losing your credibility and, ultimately, your clients. According to a FINRA Regulatory Notice 16-18, effective November 11, 2016, “The SEC approved the adoption of FINRA Rule 2273 (Educational Communication Related to Recruitment Practices and Account Transfers), which establishes an obligation to deliver an educational communication in connection with firm recruitment practices and account transfers.” So, when a client’s advisor changes firms after November 11th, that client will receive a notice suggesting he question whether his advisor is moving for the right reasons. That recommendation alone can be enough to make clients question something they never would have second-guessed before. It’s the wirehouses that pay the biggest deals. But, what if – from a long-term perspective – a wirehouse doesn’t provide you or your clients the amount of freedom, flexibility and control you and your clients deserve? What if you are really meant to do something more entrepreneurial and build your own independent firm? Will chasing the money cause you to wind up in a place that won’t feel soulful?
To be sure, the ability to take such meaningful chips off the proverbial table can be powerfully seductive. And there is nothing wrong with doing so, provided the primary motivation for the move is to service clients better than you can at your current firm.
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To ensure long-term success and nurture solid relationships based on trust, the focus has to be on the clients. It has been my experience that when you do the right thing – in this case, putting care for clients ahead of personal financial gain – the money and happiness will follow.
