Myths, lies and recruiting truisms

I spend my business days talking to financial advisers and their bosses. I talk with them at firms big and small, in all parts of the country. It's fascinating to me how many myths and outright lies I have to debunk every single day. Rather than continue to pull my hair out (and there's very little left) doing this on a phone-call-by-phone-call basis, here is Sarch's attempt to debunk and demystify the worst of these all at once. Let's start with the big one: Upfront deals. I know at least three things for certain: Jack Bauer never has enough time, high school boys always lie about their sexual prowess and exploits, and financial advisers lie about the offers that they receive from the competition. The roots of this are clearly in the macho culture prevalent in the retail brokerage industry, where bragging about compensation is a way to impress one's peers and inflate one's ego. The facts, however, are that deals have gone steadily down since the first quarter. More confusion is created because all deals have different terms, different backend requirements, and are skewed towards the bigger folks. When I talk to advisers, everyone seems to expect the “best deal out there.” But “A” deals are only available to A+ advisers ($1 million or more in income, $100 million plus in assets, one firm, no compliance problems, fee-based business). I wish that there was an NYSE listing where advisers could check their “value” daily. There is no listing, obviously, but make no mistake that deals change constantly. Hiring managers are often guilty of the next big lie: Moving is easy. It ain't. If it were, why would firms pay upfront money to induce you to move? Related lie: None of the assets transfer. That's what the “losing” firm's brokers and managers will spin. When the Branch Manager at the losing firm stands up at his sales meeting a week after Joe's departure and brags that “all of Joe's assets are still here,” and warns that “those of you who are thinking of leaving should consider this instructive,” he's telling the truth. Then again, it's only been a week. Ask him about Joe a month later and I promise you the story will be different. Again, if nobody is able to transfer their business successfully, why do so many advisers move, some several times. “Because they get paid!” you cynics respond. Look, if you can't move your practice, then you should NOT move. The money is NOT worth it. But if advisers never successfully move their practices, why do firms continue to pay them to try? The fact is that most moves are successful because the clients have a relationship with, and are loyal to, the adviser. On the other hand, senior executives will tell you that it is easy to move to their firm, while nobody of consequence ever moves successfully away from their firm. Another lie. Good people leave all firms and bad people sometimes are hired because firms sometimes make mistakes when they hire. At the same time, they will constantly tell you that their “platform” (that all-encompassing word describing all the services provided to advisers and their clients) is the best out there. Myth. And it is also a lie that just because a firm is smaller, their capabilities are not as strong as the big firms. Small firms do not have the name recognition of big firms (not necessarily a bad thing these days) but many of them truly have big firm capabilities. The truth is, the average senior brokerage executive has very little up-to-date knowledge of his competitors' platforms. It is up to you, during the interviewing process, to learn about how your prospective new firm's capabilities, both strengths and weaknesses, match up with your practice. And the true independent can buy (granted, at a significant price) off-the-shelf software that will surpass anything a brokerage firm provides. The PC revolution has equalized capabilities to such a degree that a start-up brokerage firm, using one of the big clearing firms, can surpass the platform capabilities of the biggest national brokerage firms. Sadly, I also have to add “the myth of friendship.” When you depart a firm for which you worked for many years, you assume that your friendships are real and lasting, and that your friends will protect your book, not solicit your clients. Bad assumptions. In good times and bad, greed surpasses friendships. Advisers tell me horror story after horror story about betrayals by ex-partners and advisers at their old firm. These “friends” will insinuate that a sordid sexual affair forced the departed adviser to leave, or attempt to demonstrate to a “friend's” clients that only an idiot could have filled their portfolio with such garbage. Scorned branch managers, wishing to set an example to scare away future defections, will give additional cash incentives in order to retain accounts. Then there are always the office rats who take joy in spotting one of their “friends” meeting a competitor — and then text their branch manager about the meeting before the cocktails are even finished. Of course, there is the occasional act of common decency in the world of big brokerage. I know of one Raymond James adviser who dropped dead of a heart attack on a golf course. The folks at Raymond James gave the widow a check for approximately 100% of the adviser's trailing twelve months' gross production. At Merrill Lynch, an adviser who was a cancer survivor left to a competitor. His old team never solicited the accounts. Finally, there are headhunter lies. As the recruiting wars have heated up, the number of headhunters has multiplied. Many recruiter firms have expanded to try to take advantage of the activity. Failed brokerage executives hang up a shingle. The worst of these recruiters are pure salespeople who are given monthly interview quotas. I'm told stories of desperate headhunters who badger advisers at the end of the month trying to convince them to go on a meeting so that the headhunter can keep his job. Well, people will say anything in order to save their job, in this or any economic environment. Be wary. The best headhunters, branch managers and senior brokerage executives understand that making a move is a life-changing career decision. As a result, they treat the process with respect and honesty. Have a horrible recruiting story? Have a great one? I'd love to hear about it.