The landscape of financial advising is being shaped by a major trend. Wirehouses used to be the apex of financial advisory careers, but that chapter is now closing with the ongoing migration of financial advisors (FAs) towards Registered Investment Advisors (RIAs).

Cerulli reports that the four major wirehouses – Merrill Lynch, Morgan Stanley, UBS and Wells Fargo – saw a 10% drop in FA count between 2012-2022. Meanwhile, the RIA sector saw a 66% increase in that same period, with the advisor headcount expanding nearly 8.6% in 2022 alone.

Clearly, this isn’t a short-term trend. The ongoing exodus of financial advisors into RIAs is a manifestation of what these professionals value most: independence, an experience that is better for their clients’ relationships and more freedom to grow their practice.

But making this transition isn’t without challenges. For financial advisors contemplating the move, partnering with an executive search firm like Hanover is instrumental in navigating the complex process and maximizing the benefits. Here’s how we can help.

Identifying the right firm for your practice’s future
Today, the US wealth management market is facing a talent crisis. In its 2023 report, J.D. Power found that the average age of FAs is 56, and 20% of them are less than five years away from retirement. The demand for exceptional advisors with a good book of business is surging – so it’s great timing if you’re an FA looking to move firms.

There will be several firms waiting to snap you up with an alluring deal, but you must ensure you make the right choice for your practice’s future. To ensure you can continue to expand, we focus on:

A firms’ ability to support your unique business model, ensuring you have the necessary tools, resources and technology to serve your clients effectively
How well a firm aligns with your long-term business goals, focusing on scalability and sustainability for future growth
Firms that offer the operational freedom you need to run your practice on your terms

Beware of offers that sound appealing, but aren’t a good fit for your practice in the long run. Remember that while a deal can often be well over three times your T-12, at least half of this deal is predicated on bringing over your AUM or revenue and growing it substantially. Don’t let the allure of the biggest deal cloud your vision of what is most important: your ability to grow your business at this new firm over the next decade.

Maximizing your deal
When transitioning from a wirehouse to an RIA, financial advisors have significant opportunities to maximize their deals, such as by negotiating competitive signing bonuses. Amid fierce competition for top advisors, firms are offering increasingly lucrative incentives, with some flaunting 400% deals.

FAs with the strongest book of business get the best offers. To put yourself in a competitive position, you must get a clear picture of how many of your clients are likely to follow you. This is key to enhancing your negotiating power, and we help in several ways:

Conducting a comprehensive book analysis to evaluate the composition and quality of your client base
Identifying your market positioning so that you know how to appeal to prospective firms, such as by highlighting your clients’ loyalty, growth potential and profitability
Providing key insights into things like client retention rates, revenue distribution, AUM growth and competitive benchmarking, which can be leveraged into better deal-making power

But we know that it’s not just about securing the highest dollar amount. Beyond how attractive your book of business is for them, you have to consider how suitable that firm is for your book of business. Leveraging our industry knowledge, we not only identify the most competitive offers, we also ensure that these deals align with your long-term goals.

For example, per J.D. Power, 28% of FAs report they don’t have enough time to spend with clients, with 41% saying they’re too tied down with non-value-adding tasks, like administrative duties. This can severely impact your practice’s growth potential, with 85% of clients considering communication style and frequency when deciding whether to retain services.

So, one of the things we look for in a firm is a strong back-office operation and sufficient resources so that you can focus on what’s important: looking after your clients. By considering both financial and non-financial goals, we ensure that your deal not only reflects your worth, but also supports your practice’s future growth.

Navigating client transitions
One of the most significant challenges of switching firms is ensuring a smooth transition of clients. There are a few things you have to consider here:

Despite all the legal stuff, nobody really owns clients – they’re free to go wherever they want, so your relationship with them is tantamount to a successful client transition
Always check your contract to ensure you’re doing everything by the book. Otherwise, you not only risk litigation, but reputational damage
Those who do follow you to your next firm may have concerns, so it’s important to reassure them by being transparent about, for example, how your fees may change, how you’re ensuring security and whether they should expect any disruptions

One way we help is by offering guidance on how you can communicate the change effectively to your clients, especially in a way that highlights how it will benefit them. This involves several strategies, from personalized outreach to consistent messaging and proactive planning.

We also provide insights into the legal and logistical aspects of client transitions. For example, understanding whether a firm is part of the Broker Protocol significantly impacts the ease with which clients can be contacted and moved. If a firm isn’t part of the protocol, the transition is more complex, requiring careful planning to avoid breaching non-solicitation agreements.

Our ultimate aim is to ensure that the majority of your clients transition with you, while adhering to all legal guidelines. By focusing on both retention and compliance, we help you move forward confidently and professionally.

Harnessing Hanover’s expertise
As financial advisors increasingly prioritize independence and flexibility, the move from wirehouses to RIAs is becoming a defining career shift, allowing FAs to serve their clients better and grow their practices in a more autonomous environment.

As this trend continues to snowball, FAs should harness the expertise of executive search firms to help them navigate the transition as seamlessly and strategically as possible so that the integrity of their practice is protected every step of the way.

To explore how Hanover can help you navigate this pivotal moment, contact me directly and we’ll set aside time for a call.