John Pierce is Head of Business Development at Cetera Financial Group, driving Cetera’s financial professional recruiting strategy.
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With the increased market volatility, we are reminded once again the market cycle has not been repealed. The increased volatility can be painful for you and your clients but you should not use the volatility as an excuse to do nothing. In fact, I would argue that today’s volatility can be your friend and work to your advantage. Here are five considerations about why now could be the time to consider a career move or new firm affiliation for your business:
1. Don't Try To Catch The Knife
Successful financial professionals know that it is impossible to catch the falling knife, meaning you can't time the market waiting for a bottom—or a top—to make a purchase or sale. Why would you do the same with your most valuable asset: your practice? We are seeing record movement by optimal candidates who know attempting to catch that knife rarely ends well.
2. Service Suffers
As volatility increases, clients are calling you and your service centers at record levels and facing long wait times. Smaller firms that can't or won't reinvest in the business let service drop first. Why would you work at a place where you are a rep number or required to wait in a phone queue for 30 minutes for a simple question? In your due diligence, make sure to probe service times and industry rankings on service quality. Speak with financial professionals at firms you may consider joining to see if your clients will be better served by making a move.
3. What Is Your Pain Threshold?
On top of service levels, when volatility increases, you may see technology breakdowns. For instance, with so many firms being compressed by M&A deals, one mid-sized firm "upgraded" their tech stack and it resulted in their service professionals needing four hours to open one account. Kick the tires of your target firms not only on service but their tech stack, marketing stack and advisory stack. It could be eye-opening to see who is investing versus who is contracting and using the volatility to freeze hires, reduce spend or cut headcount.
4. Your Assets Are Down
Try to avoid the "My assets are down so I want to wait until they recover before I move” trap. That is a red herring. When you move you will be entering into a seven- to nine-year time-based contract. Your assets will recover. Consider firms that have a robust backend deal structure for asset movement, where appropriate, into advisory solutions for the benefit of your clients. Most backend structures give you a year to accrue new assets—the markets will likely go up, not down, based on past historical performance coming out of a recession.
5. It's Not About You
It really is not about you; it is about your clients. You should never move for a check but for enhancements that help your clients. Clearly, you deserve transition compensation to help you and your team make a move while providing cash flow as you restart your practice. Think of it this way: "I'm moving now because I found a larger, more stable firm that is investing in technology and services to benefit you. This volatility has proven we need to be at a more stable firm that invests in its clients."
What else does this do? It allows you to invite clients you want to move to move and leave the people that may be high maintenance (and not very profitable) at your old firm. It provides a perfect opportunity to consolidate assets held at other firms—it is not unheard of to bring more than 100% percent of current assets using a consolidation strategy. This, in turn, allows you to evidence that you are focused on your clients increasing their loyalty to you and in turn increasing your enterprise value—and your multiple—when you decide to sell your practice.
For those of us that have been doing this for 20 years or more, we have learned to embrace and celebrate volatility. Eliminate any paralysis by analysis and create a short list of firms that are recruiting well in this environment and start kicking tires. Have some fun with the volatility—don't be afraid of it, and keep these considerations in mind as you contemplate your next professional home.
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