Some IBDs are targeting departing advisors using hardball tactics that may do irreversible damage to the broker dealer's reputation in the recruiting world.
MINNEAPOLIS, MINNESOTA, UNITED STATES, June 4, 2020 /EINPresswire.com/ — In his June 3, 2020 ThinkAdvisor article, “Breaking Bad Broker-Dealer Behavior,” Jon Henschen of Henschen & Associates, discusses how his firm decided to recruit solely to independent broker dealers and what their litmus test is for whether or not a broker dealer is truly independent. He shares how some IBDs target departing advisors by playing hardball, outlines five specific tactics these firms use and cautions how detrimental these actions can be to an IBD’s reputation.
Henschen opens by noting that, “I found it to be a breath of fresh air to witness the cooperative environment between IBDs and their affiliated advisors, even when the advisors moved from one broker dealer to another. It was understood that the advisor’s clients were indeed their own; they had control of their client relationships because of the trust and relationship they’d established over the years, not because of a broker dealer’s branding. If an advisor was dissatisfied or felt their BD was no longer a fit, they were free to move to a new firm unhindered.”
According to Henschen, to this day, his firm’s litmus test for deciding if a broker-dealer is truly independent is if its affiliated advisors are able to leave unfettered. Recently, he has witnessed certain IBDs targeting advisors leaving to join specific broker-dealers that appear to be especially successful at recruiting advisors from their firms in particular.
These IBDs tend to employ these tactics:
1. They refuse to transfer Albridge data.
When the broker-dealer won’t transfer this data to the new firm, the advisor oftentimes will need to lawyer up to get the data transferred.
2. They don’t pay residual fees, trails and commissions.
From the day an advisor gives notice of departure, the IBD they’re leaving is required to continue to pay these fees and commissions for a period of 30-90 days. Where an advisor owes the broker-dealer money, such as that tied to a forgivable note or to open litigation, it’s understandable for the BD not to pay out residual income. Otherwise not paying the advisor for the money earned during the contractual period is another way the BD can impose punitive action.
3. They break up departing groups of producing advisors.
When large groups change BDs, they can lose up to half of their advisors, who choose to stay behind. It’s one thing when an advisor doesn’t want the inconvenience of moving BDs, but another when the original broker-dealer intervenes and offers carrots to team members to get them to stay, such as an enhanced payout, lower rep-directed advisory administrative fee, waive broker dealer expenses of Albridge fees, Rebate of Envestnet costs or unusually high retention notes.
4. They assign clients to another advisor.
This wirehouse tactic is employed by a few independent broker dealers. Henschen has also had advisors tell them that their prior firms made up false narratives about them and shared such stories with their clients in order to make clients feel insecure about moving.
5. They delay the release of a license to the new firm.
The old firm is required to release the advisor’s license to the new firm within 30 days. By waiting the full 30 days before releasing the license, the BD’s motive is to decrease the advisor’s retention in the hope of increasing the number of orphan accounts that will then be swept into their house accounts.
The Consequences of Bad Behavior
Henschen contends that broker-dealers that decide to cross over into these non-independent broker-dealer tactics risk poisoning their recruiting waters.
Not only do third-party recruiters zero in on such behavior, but wholesalers and advisors talk about this heavy-handed spiteful behavior, too. Over time, an IBD’s reputation in the recruiting world can be irreversibly damaged.
Jon Henschen is founder of Henschen & Associates, a Twin Cities-based firm that matches financial advisors to independent broker dealers. He has more than 25 years of experience in the financial services industry and has worked as a registered financial advisor in both the independent and wirehouse channels. Jon has been featured in numerous financial publications, including the Wall Street Journal, Bloomberg News, Reuters, and the New York Post.
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Source: EIN Presswire