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Wealth Management Transitions: Pros and Cons of Changing Firms



Wealth management transitions usually occur no more than once within a financial advisor’s career. Some advisors will leave to start their own Registered Investment Advisor (RIA) firm and others will join an existing firm. In either scenario, wealth management transitions may significantly improve an advisor’s earnings and overall business.


Despite the many benefits wealth management transitions can offer, financial advisors often find themselves in unfamiliar territory. As a result, they may deal with a ton of uncertainty throughout the process.


We’ll be discussing the pros and cons of wealth management transitions to help you prepare for the next stages of your career.


Wealth Management Transitions Trends - Rising or Falling?


Wealth management is a fast-growing field. The U.S. Bureau of Labor Statistics estimates a 27% jump in job openings or 60,300 additional jobs for financial advisors by 2022.


As the industry booms, the number of wealth management transitions is also on the rise. The Covid-19 pandemic especially has had a major impact on motivating financial advisors to undergo transitions.


According to TD Ameritrade’s Break Away to Independence Spring 2020 Survey, 40% of advisors said they were more likely to transition than they were 6 months earlier. Although plans have largely been put on hold because of the pandemic, interest in wealth management transitions remains high.


Why do Financial Advisors Transition?


Financial advisors change firms for several reasons. Take a look at some of the most common motivations and benefits of wealth management transitions.


Higher Payout

Financial advisors working at larger firms may see as much as 35% to 50% of their earnings eaten up by their employer. By transitioning to an Independent Broker-Dealer (IBD) or RIA, advisors get to retain about 90% of their earnings. This enormous income gap is a common motivation for wealth management transitions.


Greater Work-Life Balance

It’s never a guarantee that wealth management transitions will result in improved work-life balance. However, 77% of RIAs report their quality of life has improved after transitioning. Financial advisors find themselves able to earn more money managing fewer clients, and having more time for family and other activities.


Building a Business Their Way

Some financial advisors considering wealth management transitions are looking to run their own practice according to their terms. They may want to focus on providing better client service or embracing more modern technology. In either case, it comes down to greater autonomy and serving clients in a way they can be proud of.


Fallout with Management

Within any industry, workplace disputes are not uncommon. Financial advisors may find themselves in a situation where they don’t see eye to eye on policies regarding client relations, ethical issues, or other matters.


Roadblocks to Wealth Management Transitions


Even though 80% of RIAs found the transition process to be easier than expected, many advisors are still bound to run into potential complications. Take a look at some of the most common drawbacks associated with wealth management transitions.


Non-Compete Clauses

Many financial advisors find themselves restricted by noncompete clauses. Noncompete clauses prohibit advisors from bringing clients over to a new firm for a certain period of time, usually around 12 months.


After joining a new firm, advisors may be unable to serve clients from their previous employer until the time frame in the non-compete clause passes. This technicality doesn’t mean advisors can’t retain clients after a transition. But it does mean financial advisors may have to contend with little to no revenue during that time.


Client Data Restrictions

Client data restrictions are another legal technicality that can complicate and prolong the process of wealth management transitions. Financial advisors aren’t allowed to share client data with their new firm. This means wealth managers will have to start from scratch when it comes to moving over client accounts. The process entails a host of paperwork which can be time-consuming and frustrating, especially when you’re not bringing in any revenue.


Losing Clients

Every one of a wealth manager’s clients may agree to move investment accounts over to a new firm. However, more often than not, a few clients will not want to transition. Financial advisors will have to contend with the fact they will inevitably lose some of their clients.


The good news is the loss of clients is usually made up for by the larger payout advisors enjoy after transitioning. Plus, 78% of RIAs have reported successfully transitioning all the clients they wanted to - suggesting the issue may not be as severe as some may think.


Top Firms Hiring Financial Advisors


Take a look at some of the top firms that Glassdoor lists as looking to hire financial advisors.

  • Northwestern Mutual

  • Edward Jones

  • Merrill Lynch

  • Bank of America

  • Equitable Advisors

  • First Command Financial Services

  • Mutual of Omaha

  • J.P. Morgan

  • Morgan Stanley

  • New York Life

What to Know About Wealth Management Transitions


Wealth management transitions can bring about many benefits. Many advisors who make the switch report higher income levels, enhanced quality of life, and overall career satisfaction. Nonetheless, there are certain challenges financial advisors need to be prepared for.


Quik! is a leading forms automation software provider that specializes in making business processes easier for financial professionals. We’re committed to helping financial advisors manage their everyday tasks as well as providing support throughout the transition process.


We’ll be discussing wealth management transitions, sharing critical information and resources that can help ensure a smooth transition process.


In the meantime, make sure to explore how our forms automation solutions can improve your workflow by eliminating paper forms.