Advisors who switch firms must do so carefully and strategically

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About one in six financial advisors in Canada are restless and planning to switch firms within the next five years – but do the benefits of doing so outweigh the costs?

According to a recent survey that Environics Research conducted on behalf of Investment Planning Counsel Inc. (IPC), 17 per cent of advisors are very or somewhat likely to change dealer firms in the five years. However, there are clearly risks. A U.S. study by Cerulli Associates Inc. found that advisors who switch dealers lose an average of 19 per cent of client assets under management (AUM).

“Don’t just make a move to make a move,” says Paul Delfino, senior vice-president and associate portfolio manager with The Delfino Group at Raymond James Ltd. in Kanata, Ont.

Although he made the transition to Raymond James from a big bank-owned securities dealer in November 2018 and retained 97 per cent of client AUM, he emphasizes that the switch was considered carefully and planned strategically.

His first meeting with the firm was in 2010, but he didn’t feel his practice was ready at that time. During the following few years, he and his team focused on achieving a level of service and client management that gave him the confidence his clients would follow him.

Mr. Delfino also started assessing client loyalty to his practice by including a question in his annual client surveys that asked which brand clients related to most: The Delfino Group, his old firm, or a range of bank and money manager names.

By 2018, he was getting the answers he wanted and, at the same time, his old firm was moving in a direction that he felt made it less attractive for him and for his clients. At that point, he decided it was time to make the switch.

“The day we left, our accounts were all assigned to other advisors [at the departing firm]. So, a client has three options: go with you, stay with the firm, [or] do something else,” Mr. Delfino says.

To maximize retention, he says it’s important to make the point that staying with the advisor, not the firm, is the status quo.

“If you like what we’re doing for you, the consistency [then you should plan to make the move along with your advisor]. That should be the default. If you want a new advisor and a new team and a different style or [to] learn a different approach, then you should stay,” he says.

Looking back, Mr. Delfino says the move was rejuvenating for him after 25 years in the business and it provided him with the flexibility to choose the business model that works best.

Jay Stark, a wealth advisor with Sutton Wealth Planning in Saskatoon, joined CI Assante Wealth Management in September 2019. He describes his old firm as “product-focused,” and when he met other Assante advisors through his philanthropic planning work, he felt that firm might be a better fit.

To test his hunch, he did “very extensive due diligence,” exploring opportunities with other organizations, talking to advisors and meeting with people at Assante’s head office. He wanted to be absolutely sure his new dealer was truly financial planning-focused and walked the talk.

“It’s a monumental task to change a dealer, so it can’t just be because the branding is better or the colours or the business cards are nicer,” Mr. Stark says.

For him, the biggest push came from his clients’ changing needs.

“As our practice has grown, the complexity of our clients’ needs has grown, [and] we felt that we were outgrowing what our dealer could provide us. It made the big task of making a change necessary. We didn’t see that we had any other option,” Mr. Stark says.

Mr. Stark used his dealer switch as an opportunity to rebrand, give his benefits and pension business its own identity, and also to focus on the most engaged relationships he had with clients. He invited about 90 per cent of his clients to make the move with him and every one of them said yes.

“We had just celebrated our 30th anniversary … and we were pretty excited to let our clients know that we were going to upgrade our practice and align with a partner that believed in [financial] planning like we did,” Mr. Stark says. “I do feel now that we have a strategic business partner that is growing and bringing tools to us that will enhance what we can do for our clients, and the side effect of all of that is we’re way more confident as an organization than we have ever been.”

If Yan Mecca, president at Gestion Finabco Inc. at IPC Investment Corp. in Laval, Que., had to do one thing differently in his move from another mutual fund dealer in September 2019, it would be to hire someone to manage the transition full-time for several months. He split the task with another member of his team and found it challenging to manage day-to-day tasks plus all the extra paperwork.

Much like Mr. Delfino and Mr. Stark, he felt that switching firms was necessary to set himself up for a successful future in an evolving industry. His clients were starting to ask him for simple things like paperless statements that he couldn’t provide through his old firm.

He also wanted better technology, in general, more comprehensive marketing support, and a platform that would enable him to easily and consistently provide distinct experiences to clients with different needs.

Since making the switch, Mr. Mecca took all of his clients and AUM with him and has no regrets.

“If you feel like your firm doesn’t have a vision for the future and a clear understanding of what challenges advisors are facing to help their clients, then you need to consider a change,” Mr. Mecca says.

“And if you haven’t made your move yet, I would say just remember the old Chinese proverb, ‘The best time to plant the tree was 20 years ago; the second-best time is now.’ I’m in the right place. I feel at home.”