Advisor Today - April 2009

BROKER-DEALERS ALSO OFFER HELP WITH
SUCCESSION PLANNING AND VALUATION.

principal owner of MCS Financial Advisors in Eugene, Ore.

Stalker, who has been through more than one broker-dealer switch, adds that you should make this discussion about the change part of a broader conversation you should already be having about your clients’ overall security.

“Everybody sees the Madoff headlines. Having a conversation around it is probably something you need to do even though that probably doesn’t sound as if it would be very comfortable. It’s probably something your clients want to have but they don’t know how to bring it up in a lot of cases. They’ll feel better about having a conversation, and they’ll know that you’re at least trying to look out for them if you’re willing to have that conversation.”

Weinberg, who changed broker-dealers in December 2006, also relied heavily on client communication. “For a client, [a switch] can mean that there’s possibly some instability in your business because they don’t understand what you’re doing behind the scenes. I was very careful when I did it to explain to them the exact reasons why. It really had no effect on them— it had to do more with technology fees and services and how I could better provide those to them,” he says.

“There’s a perception that it’s difficult to move in this market because you’ll lose your accounts,” adds Cogan. “The fact is that if you have a

good relationship with
a client, he doesn’t care
who your broker-dealer
is. I’ve seen people move
to our firm and actually wind
up with net new business during the
move! It’s because they’re out talking
to their clients, and as they’re talking
to them, they’re getting referrals.”

Do your homework. “People will spend more time on what golf clubs to buy than on what broker-dealer to affiliate with,” says Cogan. Payouts are one thing, but the cost of E&O insurance, technology fees, trading costs and other fees can quickly sour a seemingly sweet deal. That’s why sifting through the fine print and analyzing the cost/benefit trade-offs among broker-dealers make a difference. As Skloff puts it: “Why go to McDonald’s when you can have prime rib for just a few dollars more?”

To boot, competition among broker-dealers means that advisors can afford to take more time to evaluate them carefully. Skloff, who switched broker-dealers just a few years ago, says he took a full six months to make his decision. He researched his options online and within his personal network of advisors so that he could evaluate the broker-dealer’s culture as well as its practices. Skloff says he wanted a broker-dealer that came “as close as possible to the goal of being able to act in the best interest of my clients.

I wanted to work with providers that would have those values.”

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Don’t be afraid to negotiate. Most of the advisors and broker-dealers interviewed for this article agree that advisors have an advantage at the negotiating table these days. “Firms are still looking for production; they need it more than ever, quite frankly,” says Stalker.

The trick to successful negotiating, however, is to make sure that what you’re proposing is a win-win situation. “Are you sitting on the same side of the table together, looking for mutually beneficial opportunities to grow?” asks Bachmann. “Or did you come into the relationship with the attitude of ‘what am I going to get from them and what can I squeeze out of them attitude?’

“There are certain broker-dealers who will negotiate the store away, but we both have to be on the same side of the table in building it together,” Bachmann continues. “I think there’s heavy competition for advisors, I agree with that. But with the margins and everything and the expense of running broker-dealers, I just don’t think there’s that much left in it to give away.”