Advisors considering a move look for better compensation amid pandemic
A Fidelity study found advisors said a firm’s performance during the pandemic is now a critical factor in their decision-making process.
Industry consolidation, regulatory shifts and a trend toward fee-based revenue models is prompting many advisors to consider making a move to a new firm, according to a new study commissioned by Fidelity.
The 2020 Fidelity Financial Advisor Community—Advisor Movement study polled nearly 1,000 advisors, including some before the onset of the COVID-19 pandemic and some six months into the pandemic, to understand their motivations for considering a move.
Largely in search of better compensation and the ability to provide conflict-free advice to clients, 18 percent of advisors surveyed had made a move in the past five years.
Most movers went to a Registered Investment Advisor (39 percent), followed by an independent broker-dealer (25 percent) or banks, insurance, regional BD and wirehouses (36 percent). Their top reasons for moving included a desire to operate autonomously and grow their business.
About one-third of advisors said they have considered making a move, with 15 percent ultimately deciding not to move and 18 percent still considering a move. This group cited industry consolidation and regulatory challenges as reasons for considering a move but worried about the cost of switching firms.
The remaining 44 percent reported that they had no plans to make a move, citing good work/life balance and the ability to offer conflict-free advice for why they wanted to stay. Reasons cited for not wanting to make a move included fear of eating into client-servicing time during a transition and the potential to need to work more hours.
According to Fidelity, there are five stages to making a move, which takes an advisor about 10 months to move through. They include:
- Information gathering. Advisors are influenced to move primarily by former colleagues, other advisors, family, clients and recruiters, and when gathering information about potential new firms, advisors turned to home office visits, firm websites, general industry publications, reports and conferences.
- Consideration. Advisors then weigh pros and cons of making a move. Since the onset of the pandemic, compensation and better opportunities to grow business have become the primary motivators for making a move.
- Making the move. Advisors most often switched to an independent BD, followed by a hybrid RIA or independent RIA and were supported with legal/compliance support, transitional, or operational support from clearing firms/custodians and third parties. More than half of advisors had a formal transition plan in place that included repaparing, account transitions, compliance, technology and fee model/structure considerations.
- Benefits of the move. Nearly all advisors surveyed who had made a move reported that they are happy with their decision for both economic and emotional reasons. In addition, nearly all advisors said their clients were supportive despite some initial concerns.
- Reflection. Advisors report that their initial concerns were often not realized and they are seeing on average 30 percent asset growth post switch. About one-third say they wish they had made a move sooner, said Fidelity.
The pandemic uncovered some new perspectives. For instance, advisors said a firm’s performance during the pandemic is now a critical factor in their decision-making process, and many are taking a close look at whether a firm they are considering has the digital tools to facilitate remote work. Advisors were also concerned that making a move during the pandemic would distress their clients.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.
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