November 19, 2020
Recently, BrokeAndBroker.com and Securities
Industry Commentator publisher Bill Singer has been
inundated with calls from industry associated persons dealing with the impact
of the COVID pandemic, worrying about the future of their firms, and fearing rumors about reduced
compensation. Attendant to such concerns are folks contemplating resignation or
branch closures, and troubled about potential post-employment litigation
against them by their former employer. Bill raised some of the issues with
veteran industry recruiter Michael King of Michael King
Michael, I've been getting many calls from
broker-dealer reps who are chafing under the grid system and are giving serious
thought to transitioning onto an RIA platform -- any
Michael King: The
trend in the last few years has been for many financial advisors including
high-producing brokers going to an Independent model for higher payout and more
control of their business life. You can go from a payout of 45% to 90% payout,
and after expenses, can be earning 65%-70% payout. This is a very
significant difference. Many FA's feel that they do not need the imprimatur of a major name.
In moving from the Employee Channel to
Independent, be aware of all the issues that you will have to confront; e.g., managing your own office, compliance, hiring, budget, regulatory oversight and
audits.Some FA's are going to a firm that provides a lot of support
in these areas (Ameriprise, Dynasty, Fieldpoint, HighTower, Raymond James, Wells
Fargo) while others go directly to Clearing firms (Fidelity, Pershing,
Schwab/TD Ameritrade). FA's considering this should be aware of their
own "skill sets" to see how much assistance will be necessary for you. The same pattern applies if you are thinking of becoming an RIA.
If you are currently a bank channel FA, you should first check your employee contract to see what kind of non-compete restrictions are in your contract. Most banks have some sort of non-compete in their contracts since they will argue that these clients are bank clients they gave you to serve. You must present your contract to any firms that you are considering in order for them to see how they plan to handle the non-compete. Will they represent you? What is their advice on legal ways to contact your clients when you leave and suggestions that they have on how to grow your book without leads being given directly to you?
If you decide to work with a recruiter, it would be wise to investigate all of your options; e.g., extra support, working with a Clearing firm or going to an RIA space. Any move requires exploring all of your options to make sure that you are getting the best fit for the way that you work. If you are working with a recruiter, he or she should also help you to get the best transition package possible. FA's often overlook some parts of the transition package; e.g., expenses through pre-tax dollars,
Is moving during the COVID pandemic a good idea?
Michael King: Any FA's that are moving during this time are doing most of it remotely. Many FA's believe that they can move more of their clients during the pandemic when most offices are closed -- in theory, it may prove more difficult for the former firm to retain their clients. I see no reason why you shouldn't explore your options during this time. It may actually be easier to make a move now. Don't let COVID control your business life, you are still in charge!
What advice do you have for the industry's "walking wounded," who have "YES" answers on their Forms U5? In these challenging times, are such disclosures non-starters with new employers?
King: If you
dispute these allegations, it is essential that you contact a lawyer who is
familiar with our industry. Most recruiters keep a list of such
lawyers. You can also ask your colleagues if they have any
recommendations. Most firms will hire someone with one or two Yes
answers as long as they are not showing a pattern of questionable behavior by
the FA. If your record reflects, for example, a complaint related to a situation involving something like a dispute involving the ramification of a recently changed tax law, a potential employer may be more forgiving than if the complaint involves what comes off as a pattern of
questionable trades or buying inappropriate financial instruments for your clients. Bottom line, do not assume that a firm will not talk with you because you have one or two
compliance related issues. The nature of those matters are more important than the mere number.
Should I work with an independent
recruiter or is it better for me to seek out firms by
Michael King: Independent recruiters usually have
extensive contacts in the industry. All their fees are paid for by
the receiving firm and will not cost you anything or impact your transition
negatively. Recruiters are skilled in working with both
sides in order to maximize a fair transition package. Recruiters will
also notice things you have not focused on which will increase your overall
ABOUT MICHAEL KING
Michael King Associates, Inc.
1120 Avenue of the Americas, 4th Fl.
New York, NY 10036
Michael King, President has 40 years recruiting experience. We have placed thousands of FA's and are happy to give references from the FA's that we have placed if you would like.
We consider ourselves to be "Matchmakers" matching advisors with the best firms and provide very personalized service. We can provide all the choices available wirehouses, independents and RIA's. COME TO THE SOURCE!
Michael has been interviewed by FundFire, Advisor Hub, On Wall Street, The New York Times, The Wall Street Journal and other media publications.