Avoiding Firms That Over-Promise and Under-Deliver
Have you ever looked for a hotel and found one that had amazing photos–but then you look at the “taken by customer” pictures… and there’s quite a gap?
This is an unfortunately common experience for advisors in the world of RIAs, OSJs, and BDs. We all know a few advisors who made a switch, only to find their experience wasn’t even close to their expectations. Some firms are disproportionately good at offense (growing) and not defense (serving).
What Shiny Pitch Syndrome Does to Our Industry
When firms overpromise and underdeliver, it erodes the most important relationships in our industry. Advisors grow increasingly frustrated with their knock-off bill of goods, but the thought of looking for something better seems less appealing. Transitioning is a substantial investment of time and energy–one you would rather not make twice.
One advisor I worked with came to me after their firm was acquired. The OSJ/RIA promised a long list of shiny objects.
Virtual assistant
Fast, flexible compliance for social media
Consistent home office support
Etc
By the time we talked, his experience didn’t reflect the brochure.
The OSJ was price-gouging him.
They weren’t paying him for part of his business.
They never gave access to a virtual assistant.
Compliance was taking 1-2 weeks for basic turnaround items.
He had little to no support from the home office.
Etc.
Like with hotels, the customer pictures didn’t match the corporate gallery.
How To Avoid Overpromising Firms
So, how can advisors get a more reliable image of what a firm is like? It heavily comes down to knowing two things: leadership and track record.
First, on leadership.
I’m a big believer that people often matter more than platforms when choosing a firm. Most options have access to similar technology, custodians, and platforms. The biggest differentiator is the character, skill, and vision of the leadership team.
Here, an outside perspective is valuable. Get insight into the “people” variable from someone who is not out to pitch you. Get insight from someone who lives in the industry and knows the players well.
Second, track record.
What a firm has done so far is arguably more important than what it promises to do. Here, we can look at more objective factors like:
How aggressively are they spending on M&A?
How is their retention?
Is private equity part of the ownership structure?
You can also see major questions that are future-facing. One of the most important is the average age of the leadership team. Is all or most of the ownership team nearing retirement? Or is there a multi-generational structure in place?
Data points like these can be far more informative to your decision than any sales pitch.
Accelerate Fact-Finding, Decrease Risk Taking
Doing enough strong due diligence is a challenge for any advisor considering a transition. You wear a lot of hats as is. Business owner. Advisor. Spouse. Parent. Volunteer. Etc.
This is why I heavily recommend advisors get help in weighing their options. It’s a time-intensive process on your own and accurate data is non-negotiable. When I work with an advisor, we can accelerate the fact-finding process and help you be far more confident in your understanding of a firm.
You’ll have an industry veteran on your side, helping you evaluate your options (including if no transition is your best plan). You’ll also get pricing transparency with me–you’ll never wonder if I’m financially incentivized to direct you to certain firms for my own gain.
If you’re considering a decision as substantial as a transition to a new BD, OSJ, or RIA, I’m here to help.
