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Passion is essential for growing your business as an advisor, but most broker dealers don’t exactly support that vibe. In fact, the protocols in place at many of the larger broker dealers are a de-motivator that stifles even the most passionate advisor’s enthusiasm. If you’re looking to grow by realigning your practice with your inner beliefs and passions, here are five reasons to move to a small or mid-sized broker dealer firm.
1. Better client service
Confusion and ambiguity are the enemies of business growth.
Do you like being Rep #47121, or do you feel that being on a first-name basis with the person servicing your relationship is more conducive to getting things done? There are so many nuances that go along with this business, from settling trades to account paperwork to licensing and registrations.
A streamlined, direct process that results from highly interconnected people makes a difference to how your clients experience working with you.
2. Fewer marketing roadblocks
The wirehouses take marketing restriction to an extreme. This comes from their necessity to exert control over a large and quota-driven team of broker-dealer representatives.
Think about how scary it is for the compliance office who oversees hundreds and hundreds of reps. Most of the time, reps play by the rules. But you do get the occasional maverick who wants to make a point out of making your life miserable. This is the quintessential bad apple that ruins it for the rest. So as a result, anytime Rep #47121 wants to get even the most straightforward communication approved, like a quarterly newsletter, you have to go through a tedious process. Really it’s just a defense mechanism.
And you also shouldn’t overlook that the UBS and Morgan Stanleys of the world have a vested interest in preserving their brand identity. They have a centralized marketing department that spends millions and millions on campaigns that management has determined to be their strategic focus.
Look at it from their point of view. You’re the head of marketing at JPMorgan. You spent $5 million on a marketing campaign that involved surveying various business leaders around the globe. Now Rep #47121 wants to write a blog article about how large corporations are the demise of economy and as an alternative you should invest in small-cap stocks. That’s not going to go over well with your boss, the one who wrote the $5 million check. Remember him or her? So in advance of the angry phone/email, JPMorgan makes it as painful as surgery without anesthesia anytime any rep wants to post a Happy Thanksgiving card to social media.
In my experience, the smaller the broker dealer the more freedom there is in terms of marketing. It’s logical if you think about it; the creativity is where a smaller firm has the opportunity to outshine the wirehouses and broker dealers. So they have to let their reps express themselves a bit more to allow them to grow their businesses.
Also, at a small to mid-sized broker dealer you have the personal connection that you wouldn’t have at a larger one. For example, at my broker dealer firm my compliance officer is on a first name basis with our reps. Most of the time, it takes only a few days for a rep to get a marketing piece approved. Also, we have an in-house graphic designer who helps them make their pieces look stunning on social media. This has mobilized my team and helped them be known. In a rapidly moving digital age this is a huge advantage for them.
3. Payouts tend to be richer
Now, before I put my foot in my mouth and make a general statement that everyone pokes holes in, I’ll issue the disclaimer in advance that every company has its advantages and disadvantages from a fee standpoint.
In my experience, the smaller or medium sized broker dealers tend to avoid “feeing to death” their reps and offer higher payouts. This is in part to motivate the reps at larger broker dealers to come to them, and also to encourage retention. There also can be less overhead at a smaller operation.
As an example, our reps are always astounded when their clients call our tech support line for help and we don’t charge anything for it. They were expecting us to bill for the hours spent — but in our view, it’s a given that a broker dealer should provide technology that works for the clients of our firm.
4. Less quota-driven
Many of the larger broker dealers are quota-driven. This encourages turnover and creates undue pressure on the rep to make decisions that he or she would not have otherwise made if the risk of failing to meet the quota were not looming.
The best motivation you can give a rep to grow his or her business is the ability to align the business with his or her values. You’ve got to tap into the purpose and the reason that many advisors got into the business and that is because they are driven to help other people. That is what is at the core of people’s existence even more than the paycheck. Once you do that for people you find that the performance takes care of itself.
5. Cultural alignment
Advisors are all individual performers when it really comes down to it, but that doesn’t mean that you have to operate in isolation all the time. The reps at most broker dealers don’t generally feel connected to each other. And, technically, of course they aren’t. But wouldn’t it be great if you could be at a broker dealer where you felt like you were part of something bigger than yourself?
A culture is defined as a group of people with similar beliefs that lead to accepted behaviors. Culture influences thought. Have you ever caught yourself speaking or acting like someone just because you are constantly in their presence? You may not even like the person. It’s inevitable that human beings tend to mimic the behaviors of those in their immediate surroundings.
If you want to be a part of something that will motivate you, look at the cultural values of your broker-dealer firm. Do you even know what the company’s values are? What about their mission? Does it seem like the reps at your firm are motivated by some common goal other than getting paid or is that it?
Grow your passion, grow your assets under advisement
It’s crystal clear when an advisor is motivated by a higher purpose. Large broker dealers and wirehouses don’t encourage this. A small- or medium-sized broker dealer has the potential to offer reps more attractive features such as better client service, marketing freedom, better financial rewards, less emphasis on a quota and an aligned culture. All of this allows reps to bring their practice in line with their passions which is what they need to grow their business.
Stephen Distante is CEO of Vanderbilt Financial Group, the Sustainable Broker-Dealer & RIA, and president of EO New York.
This information is not intended to be a solicitation to offer for sale any securities products. The information contained in this article is for general guidance on matters of interest only.
Vanderbilt Financial Group is the marketing name for Vanderbilt Securities, LLC and its affiliates.
Securities offered through Vanderbilt Securities, LLC
Advisory Services offered through Vanderbilt Advisory Services, LLC
Member: FINRA, SIPC • Registered with MSRB
Clearing Agent: National Financial Services, LLC
Read more articles by Stephen Distante
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
