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Aug 03, 2023


Recently, a wirehouse advisor with three million dollars in revenue was ready to make a change – but he told me he just couldn't leave the wirehouse channel. Instead, he was going to take a check and move his book to another wirehouse. The FA said he felt "institutionalized" after 30 years and simply couldn't change. It was a sobering discussion.

He asked, "Do you remember the movie, Shawshank Redemption, Sully?" I responded, "Of course, I do. It's probably in my Top 25 All-Time." The FA continued, "Do you recall the scene when Brooks was paroled after 50 years of incarceration, and afraid he couldn't make it on the outside?" Again, I responded, "Of course." Sadly, the FA said, "I'm a lot like Brooks -- and so are my partners. Do you remember what the Morgan Freeman's character, Red, said about Brooks?” I admitted, "No, I don't remember." The FA said, ''The man has been institutionalized. This is all he knows." Finally, the FA said, "After 30 years of working for XYZ, I am institutionalized. And so are my partners. That's why we can't consider independence." My heart broke for him!

This FA and his partners are among the industry's best. They deliver on all fronts: holistic financial planning, diversified investment portfolios with excellent performance, and 5-star service. We would all be so lucky to have our personal accounts with this team! The FA falsely believes his clients are more loyal to the wirehouse than to him. He's also convinced his team can't run their business independent of the bureaucratic structure of a wirehouse firm. Tragically, these institutionalized beliefs come with a 55% price tag.

He would be pleased to know that 95% of clients follow their advisors who transition to independence. Moreover, running a successful wealth management business, particularly with the help of a firm like Steward Partners, Dynasty or Kestra, is easily accomplished nowadays.

I know the feelings of institutionalization firsthand. I spent 34 years working at a wirehouse. Veteran advisors know wirehouses are the epitome of diminishing returns. Wirehouses have lost significant value to advisors over the past decade. They are increasingly led by executives who were never advisors. Compliance and HR often have a disproportionately strong voice at the executive roundtable. Culture and morale steadily erode year after year. Advisor entrepreneurialism, once welcomed, is now a threat to hierarchical executives. Compensation cuts are routine, particularly when needed to safeguard profit margins. The list of how the wirehouse environment has eroded is endless. If financial advisors did an earnest cost-benefit analysis, they wouldn’t walk; they’d run for the exit doors!

Here's a question for wirehouse advisors to ponder. How many financial advisors do you know who have left independence (i.e, an RIA) and joined a wirehouse? Absolutely none! No one breaks into an institution! Even when they pay 300% of trailing twelve!

In my experience, advisors who transition to independence have three things in common. One, most have never changed firms before. Two, they are million or multi-million-dollar producers. Three, it's the last move of their career.

If it's your last move, you owe it to yourself to make it the right move!