Evaluating Financial Advisors Without a Book of Business
by Bob Sutton
The wealth management industry is going through an asset consolidation phase. Smaller firms are being acquired by larger firms in order to grow their own total AUM. And then those firms are either getting acquired or are attracting attention from Venture Capital. Qui-Gon Jin from Star Wars said it best: “There’s always a bigger fish.” And yet everyday people are branching off to start their own firm and the cycle starts anew.
So, it’s clear how that system works. Firms are looking for advisors with AUM, which starts the process of growth. But what about advisors who don’t have a transferrable book? Maybe they were with a firm that had a team approach to advisement, or they had to leave their last firm quickly due to family challenges, or they signed a non-solicit. There are many reasons why they may not have a book. So, how should firms evaluate these experienced financial advisors when their book won’t come with them.
Previous track record of growth
This is likely the most obvious place to start. Anyone who has experience should be able to share how their previous successes and asset growth will carry forward to their new role. Few advisors are handed success on day one. They need to go out and win business through the hard work of building relationships.
An experienced advisor will be able to tell you how they broke through the initial challenges and grew their book of business, AND how they can do it again. Are they a hunter or a farmer? Firms have different needs, so if you’re hoping they can grow quickly, ask what they plan to do to make it happen.
Team edification and sharpening
Since any advisor coming from outside your firm will have a different and unique experiences, they will bring a skillset and expertise that you may not already have. During the interview process, press into their unique areas of interest and expertise. Do they have a knowledge base that can help your firm expand into new territory or help existing advisors improve their own offerings to clients? Quality advisors are multi-faceted and can sharpen your team’s collective skills.
Similar Investment Philosophy and Target Market
If a new advisor is going to work for the long term, they will absolutely need to agree and align with your investment philosophy. If your firm only uses passive trading or socially-responsible trading, you want to makes sure that prospective advisors are on board before they join in and decide to go their own way. Additionally, you’ll, of course, need to make sure you’re serving the same target market. If you’re a retail firm and they have only worked with UHNW clients, there will be a major mis-match of client service and expectations. At minimum, this should be discussed in great length during the interview process.
There is a lot of talent in the FA market, and those without transferrable business should not be overlooked - especially if they meet these three criteria.