A recent article from Financial Planning suggests that financial advisors continue to be on the move in 2012. But the trend is not departures to the traditional wirehouses - instead, they are going independent:
Twelve percent of financial advisors change firms annually, according to [Chip] Roame, but two-thirds of those advisors are still “landing” at another wirehouse. Roame said he expects more advisors to shift to the independent channel. “I think the big elephants have moved,” he said. “The more interesting thing is who might follow.”
Roame expects the traditional wirehouses will try to meet these type of producers half-way by creating an alternative:
Roame said he expected one of the wirehouses would have already responded was by creating a “halfway house” as an alternative for advisors that were considering independence. This “halfway house,” which he predicts will happen at some point this year, would enable advisors some of the benefits of independence and ownership while remaining under the wirehouse umbrella.
FAs considering making a move should be aware that moving to a non-protocol firm could bring a potential lawsuit from their previous employer. No matter the move, FAs should always consider:
- Are they employed at a protocol firm?
- Would they be moving to a protocol firm?
- If they are not moving between protocol firms, what is the likelihood that they will be sued over any restrictive covenants (non-compete - non-solicits) that exist in their contracts?
- Is the financial upside of new employment going to outweigh the paying potential financial losses of moving to a new firm?
- Is the new employer in a position to help the FA successfully move their business - are they up for the fight?
- What does the new employer's employment agreement look like? Are there more restrictive covenants? Are they more burdensome?
These are but a few areas to consider. As with any employment move, the employee must make a smart decision based on the pros and the cons. The grass is always greener on the other side of the fence.