When advising advisors and teams, a crucial initial step is the evaluation of your true worth or value. Frequently, we tend to underestimate our own value—a challenge rooted in our innate subjectivity towards self-assessment. This is a pivotal factor in what we try to profess with most any advisor – understand the value of your practice. Our expertise lies in aiding advisors through this critical analysis.
The decision to stay with a firm or to move on is monumental. We’ve walked the same path in wealth management and grappled with this very question. Typically, it arises when management exerts such pressure that running our practices according to our vision becomes untenable.
So, what constitutes an effective evaluation process? A fundamental query emerges: What do you gain from the revenue share the firm takes? If the firm claims 70-50%, what justifies this? Do you genuinely believe the firm provides resources that you couldn’t acquire independently? The standard responses often revolve around branding (which loses potency in an era of widespread, ubiquitous platforms), leads, referrals for practice growth, and what else, precisely? Major wirehouses command significant percentages—Goldman Sachs, for instance, offers a 20% payout with 10% in GS stock—yet the rationale behind this remains unclear.
A significant stumbling block for advisors lies in succumbing to behavioral finance, a subject we study extensively for our CFP and CIMA exams. People tend to resist change, fearing the disruption of the status quo. Anchoring points cloud our perspectives, and we’re prone to cognitive dissonance and confirmation bias, affirming our existing beliefs rather than taking an objective view, as we would when selecting investments for clients.
The status quo bias can be as simple as a fear of change, a reluctance to complicate one’s life further. Irrational biases manifest in beliefs that a transition is too daunting due to the size of a book, one’s age, being part of a sizable team, or the perception that the landscape remains unchanged across firms. In reality, large teams frequently relocate for improved deals and cultural alignment, swiftly taking the lion’s share of their business with them. Many firms offer appealing transition packages for senior advisors—a point worth exploring. Loyalty, though a natural human inclination, prompts the question: loyalty for what?
A valid concern is the financial commitments tied to a note or obligation. Some firms bind advisors to 9- to 11-year terms to spread out capital expenses, which primarily serves the firm’s interests, not necessarily the advisor’s. In transition, numerous firms are now willing to settle note balances on behalf of advisors, alleviating potential obstacles. Understanding where you stand with any note balances is crucial, but there are avenues to navigate this if a move is desired.
Advisors who have embarked on this transition report it to be the most rewarding decision they’ve made. Occasionally, a degree of discomfort or complexity is a necessary step towards achieving ultimate goals. This is why working with advisor consultants substantially eases the burden of finding the best fit and economic packages. Ultimately, the imperative is to recognize your worth as an advisor, just as you would comprehensively understand your client for making optimal investment decisions (KYC). This is the essence of “Know Your Worth” (KYW) as an advisor for your career.