Brooke’s note: I recently wrote an article about two UBS brokers in Pittsburgh who moved their assets to TD Ameritrade and doubled their income virtually overnight. I have interviewed dozens of breakaways in recent months and the most common regret I hear is that they didn’t make the move sooner. To people close to independent advisors, they realize that there is — relative to wirehouse life — a transcendent quality to newfound RIA life. But for every broker who has reached that realization, there are dozens more who don’t budge from their cubicle. John Furey brings us into a broker’s mind in this column and elucidates the challenges in getting them past their fears.

The breakaway advisor market is experiencing a V-curve recovery. For the past two months, announcements of new boutique RIAs have been a daily or near-daily occurrence.

Yet, the vast majority of wirehouse advisors are still comfortable sticking with the status quo. The majority of private client assets are still locked up within large financial institutions, where about 60,000 advisors or brokers manage client assets.

Over the years, as the former head of Schwab Institutional’s [now Advisor Services] “Advisors Turning Independent” program, I have worked with many wirehouse advisors I was certain would leave their employers and set up their own shops. In countless scenarios, many advisors were not willing to “walk the talk” and either transitioned to another wirehouse or did nothing.

Inconsistent

What intrigues me is many advisors’ ultimate decisions were inconsistent with the solution they acknowledged was the best move for their practice and clients: independence.

My firm, Advisor Growth Strategies, is pulled into various conversations with advisors and sales professionals throughout the industry. Being in the center of the hurricane hitting the advisory business, I hear the challenges and frustrations of advisors who consider breaking away, but just have not been willing to pull the trigger.

What stops advisors in their tracks? The last market cycle confirmed one obstacle – unstable and poor equity markets. The reason is obvious – advisor production is down and client performance is even worse.

No advisor wants a two-part sale to convince clients to follow them to independence and explain why their portfolios are so low. One West Coast advisor with $150 million in AUM that I’m helping shared with me in Q1: “I just couldn’t risk giving my clients a reason to re-evaluate their relationship with me.”

The myriad independent options can also be a distraction. For the elite and even mid-tier advisors there are so many choices, that sifting through them can become paralyzing. Advisors do not have the time to complete the required due diligence, so they wind up deferring doing anything at all.

Right marriage

I was hired by a $500M AUM wirehouse team to help them sift through the choices so they won’t hit a landmine. One advisor told me last week, “We’ve had many conversations, but we still haven’t found the right marriage yet.” See: How to choose between the bewildering custody choices

Advisors are constantly being called by recruiters, sales people and consultants, all seeking to place them in a new home. The reality in the market is that most advisors are leery of sales people and headhunters and proceed with caution when engaging them. One LPL advisor told me “I get a call from a recruiter 5-10 times a week and return no calls.” Top advisors only engage professionals that are referred them within their trusted network.

One of my colleagues, Brian Hamburger, recently wrote a column that demystified retention bonus mechanics. Executives at wirehouses and under-informed industry analysts feel that elite advisors are now “locked up” for the next 7 years, but the jury is still out on this one.

A friend of mine who is part of $2 billion AUM team in Phoenix told me, “We are in year three of our loan. I want to look at other options, but my partners just will not entertain giving the money back.”

But another wirehouse advisor in California told me last week that “I banked my retention bonus just in case I need to pull the ripcord.” If he wants to pay the bonus back, he can.

Deal killers

Every advisor and every transition is unique. By understanding what the major deal killers are and how to overcome them, advisors can realize their vision of independence.
What stops breakaway advisors in their tracks?

1. Poor market environments
2. Lack of time or expertise to conduct due diligence
3. Start-up costs
4. Lack of confidence to become a “business owner”
5. Fear of stepping on a land mine
6. Unwillingness to “buy their freedom” after a retention deal

John Furey is Principal and founder of Advisor Growth Strategies, LLC, an independent consulting firm providing customized solutions for wealth management firms and advisors seeking to grow their business. John can be reached at jfurey@advisorgrowthllc.com.