What Are the Pros and Cons of Changing Firms as an Advisor?

If you’re looking for growth opportunities or would like to experience a different type of company culture, maybe you’re considering moving to a new firm. According to J.D. Power, a typical advisor has three or more employers throughout their career. But why do financial advisors change firms? The reasons vary depending on each advisor’s individual situation. But if it’s something you’re contemplating for yourself, it’s a good idea to weigh the pros and cons before making the leap.

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Reasons to Change Firms (and Why You Might Reconsider)

Trading your current firm for a new one may have advantages and disadvantages, depending on where you are in your career and your professional goals. Here are some of the main pros and cons to weigh when making your decision.

Pros:

• Changing firms could enable you to pursue avenues for growth that aren’t open to you now.
• There may be more opportunities for advancement if you’re interested in taking on a senior advisory role.
• A new firm could offer greater flexibility in terms of the types of clients you work with, working hours or remote work options.
• Your new position may offer a higher base salary or employee benefits that raise your overall compensation level.
• You may have room to challenge yourself, acquire new skills or focus on business development with a different firm.
• The company culture at your new employer may be preferable to the one you’re at currently.

Cons:

• There may be limitations on your ability to bring your book of business with you when changing firms.
• If you’re able to take your clients with you, they may feel uneasiness or discomfort about moving to a new firm.
• You may find there’s a learning curve as you navigate how your new company operates, or the culture could be a mismatch.
• Switching to a new type of compensation model could require you to adjust your business practices to keep your revenues at the same level.
• A new role may require you to obtain securities licenses or certifications, which could mean a significant investment of your time and money.

Why Do Financial Advisors Change Firms?

When advisors change firms, it’s often for a variety of reasons. There’s usually no single cause. You might consider a move to a new employer if you:

• Feel stagnant in your current role and want an opportunity to stretch your wings.
• Are dissatisfied with the financial side of your job, whether it’s the compensation structure or your benefits package.
• Believe that your current company culture is a mismatch with what you need or want from an employer.
• Are looking for a role that can allow for greater work-life balance or flexibility.
• Have had disagreements with your higher-ups that you’re finding difficult to resolve or move past.
• Would like to work for a firm that’s tech-focused and up-to-date on the latest advisory trends.

It might be one thing or any of these things driving you to look elsewhere for an advisory role. You may also lean toward a move if you’d eventually like to go independent.

For example, you might partner with an RIA aggregator to start your business. RIA aggregators provide advisors with the infrastructure and support they need to run their businesses, without some of the challenges associated with being fully independent.

How to Change Firms as an Advisor

If you’ve decided that a new firm better meets your needs, there are certain steps you’ll need to take to complete the transition. Here are some questions to weigh before, during and after the process:

• Will your clients be coming with you and, if so, what percentage of your book will you keep?
• What questions are your clients likely to have for you about the transition?
• How long will the onboarding process take?
• What support will the new company provide to help you get up to speed on things like back-office processes, technology use and compliance?
• What level of support is available once onboarding is complete and who can you go to if you have questions?

If your current employer enforces a non-compete clause, that could affect your ability to bring clients with you to a new firm. There may be a waiting period that could last one year or longer. Broker protocol rules, meanwhile, restrict which client information you can take with you. It’s important to familiarize yourself with regulatory and firm-specific rules to ensure your transition is compliant.

Once you’ve covered those bases, you’ll need to decide:

• When to hand in your resignation
• When your last day will be with your current firm
• And when you’ll start your new job

It’s up to you to decide what timing works best based on when your new employer expects you to begin work.

As you plan for your transition, consider which licenses you’ll need to transfer and register with your new firm. If any of this seems confusing or overwhelming, there are transition consultants who can help you navigate each step. You’ll pay a fee for their services, of course, but it could be worth it to ensure that you’re approaching your move the right way.

Frequently Asked Questions (FAQs)

How Often Do Financial Advisors Change Firms?

Advisors may change firms every few years or stick with their employer for the long haul. A typical advisor has three employers throughout their career, though some may have more while others have less.

Why Do So Many Financial Advisors Quit?

Advisors quit for a variety of reasons, including poor company culture, a lack of support and dissatisfaction with their clients or compensation. Some quit because they find being an advisor too demanding, too challenging or simply not what they expected. Whether it makes sense to quit requires an evaluation of your career path, goals and financial situation.

Can Advisors Quit to Go Independent?

Quitting your current employer doesn’t mean you have to go looking for a new one. You might decide to work for yourself as an independent advisor instead. Going independent has some advantages if you’re looking for freedom, flexibility and increased earning potential. That doesn’t mean it isn’t challenging, however. It’s important to understand the implications of following an independent advisor path.

Bottom Line

Moving to a new firm (or going independent) is a big decision, one that may require some research on your part before you make a decision. Looking at the upsides and potential drawbacks of switching firms can help you decide if it makes sense for you and your career goals.

Tips for Growing Your Advisory Business

• If you’re leaving your clients behind to join a new firm, you’ll need to double down on marketing to drum up business. Partnering with an advisor marketing platform could help you gain some traction as you work on promoting your services to prospective clients. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you build your practice’s marketing operation. Get started today.
• Compensation may be your primary reason for moving to a new firm, and it’s important to review the pay structure thoroughly to understand how you’ll be paid. If you’re used to a fee-only model, for instance, a compensation structure that allows you to earn commissions may take some getting used to.

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