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The Truth About Why Brokers Leave Their Firms.


For the last ten years there has been a superwar raging for Financial Advisors. Especially the last five. And your broker is a mercenary, going to the highest bidder.

Your broker’s big payday? It’s based on how much of your money is moved to the new firm & how much in fees your money will generate. You’re not really surprised, are you? Let’s start the bidding, shall we…

Do I hear bonus checks for 150% of your broker's last twelve months of revenue? 200% for a 5 year contract? 7 year contract? Do I hear 300%, for a 10 year contract?

Sold American.

Yep. Your advisor is brokering you & your money. And you remember the pitch, right?

“Come with me– this new place is awesome…WAY better”

Or was it?... “this new place is pretty much the same, but I’ll get a humungous bonus check to make the move.”

My manager was the first one to break it down for me. “You’re going to take a check one or two times in your career, so be smart about the timing.”

Whenever someone left though, it was like Jerry Maguire on the phones– kill or be killed. My manager wanted blood. He wanted the money to stay, it didn't matter if his best friend had left, once that resignation letter was on the desk all bets were off. His annual bonus depended on it.

My manager took his check in 2005, in the wake of the IPO mess of 2000 that was still stirring in everyone’s portfolio. Most of the office was washed out from it. Brokers were worried. They all looked like jerks. My manager knew it, so he decided to make a clean break to the firm across the street. Ironically, 4 years later his new firm would merge with the old firm in one of the many shotgun weddings in the wake of 2008.

The fact was after the tech implosion, those Schwab “Lipstick On A Pig” commercial playing on the television endlessly did hurt, because it was true.

The veterans in our office & my manager said the same thing, “best time to build a business” and “it will blow over…” And they were right.

But starting around 2007, the firms started realizing a few things: 1) The internet is changing everything 2) Brokers are tired of apologizing for their firms’ transgressions 3) clients are getting smarter about the game. (and sites like Brightscope are becoming a reality)

So the firms started buying the loyalty of financial advisors, paying exorbitant prices. Those big 10 year deals for your broker? That’s Wall Street’s insurance policy from you leaving them. They’re buying time until they can figure out the next move, the next chapter for your money.

It’s Wall Street’s put.

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Comment   |  7 years, 11 months ago from Manhattan Beach, CA