Study Examines What Firms Can Learn From Advisors Who Move and How That May Influence Recruiting and Retention Strategies
BOSTON–(BUSINESS WIRE)– Fidelity Clearing & Custody Solutions, the division of Fidelity Investments that provides clearing and custody to registered investment advisors (RIAs), retirement recordkeepers, broker-dealer firms, banks and insurance companies, today released the results of its 3rd bi-annual study on advisor movement. The study explored the motivations and experiences of advisors who switched channels, which Fidelity terms “Movers.”
Nearly 34,000 financial advisors switched firms in 2014.1 And Fidelity’s research reveals that, compared to its previous study in 2013, those who are Movers today are more likely to be female (14 percent vs. 8 percent), have clients with higher assets ($829,000 vs. $673,000), and tend to be younger (22 percent are Gen Y vs. 14 percent in 2013). In fact, almost one-third of Movers made their first moves within the first four years of their careers. Fidelity research found that there are more Gen Y advisors among the highest-producing Movers (43 percent of advisors with $250M+ AUM versus only 14 percent in 2013), meaning more business is at risk with these young and early movers.2
“Clearly, advisors are on the move; and, if they’re not moving, they’re thinking about it,” said Bob Oros, executive vice president and head of the RIA segment at Fidelity Clearing & Custody Solutions. “We’ve been telling firm leaders that they need to go beyond viewing this trend as a threat. Instead, let’s try to understand the motivations of these advisors, particularly the younger ones, so that this becomes an opportunity for firms to gain insights into how to attract new talent and retain their existing workforce.”
Lessons from Movers
Moving to independent channels continued to be the largest trend (50 percent of Movers chose an RIA or IBD), and Movers who chose an RIA or IBD cited several reasons for their decision, including having more control over daily operations, the ability to focus on clients and more independence in developing and executing investing strategies. Based on comparisons to previous studies, financial motivations – while still one of the top reasons to move – may be less important now than they were in the past: Movers more frequently cited having more control over their practice (15 percent vs. 8 percent in 2013) and having a better work/life balance (30 percent vs. 21 percent) as among the top reasons for leaving their previous firms.
The research also shows that most Movers are seeing benefits from their decisions: 92 percent of Movers said they are happy with their decision to move; 80 percent of Movers are in a better financial position after the move; and Movers reported a big jump in satisfaction (only 8 percent were satisfied before the move vs. 67 percent after the move). From a financial standpoint, Movers who have been with their firms for three to five years saw, on average, a 59 percent increase in their assets under management (pre-move the average AUM was $105M and post-move the average AUM was $167M).3
Movers experienced some challenges they wish they had known about prior to their moves, though these challenges are less of an issue now than they were in the past: the amount of paperwork involved (25 percent vs. 39 percent in 2013), the length of the transition (24 percent vs. 29 percent), technology issues (20 percent vs. 28 percent) and the difficulty in transferring investments (16 percent vs. 21 percent). This may be due to the fact that advisor movement has become more common in the industry, and for more Movers, former colleagues who had already moved were involved in their decision (40 percent vs. 29 percent in 2013), possibly helping to set more realistic expectations.
Key Considerations for Firm Leaders
By understanding what drives the advisors who are Movers, firm leaders can develop targeted retention strategies to take advantage of talent opportunities. Findings from this study, as well as research from Fidelity’s Future Leaders Study, reveal that firms are more successful when they formalize a support structure to develop and retain top talent. Some considerations for firm leaders include:
- Providing greater autonomy around and improving investment capabilities: Movers are looking for the freedom to choose investing strategies that are most appropriate for their clients and they want access to research and analysis on investments. Consider how to improve existing systems and potentially implement new ones.
- Providing more explicit information on compensation: For younger advisors, consider providing training and communication on how compensation works at the firm, initially and throughout their careers. Also, create a clear career path with transparent guidelines on the results needed to transition from one role to another. And for more experienced advisors who are critical to the firm, consider offering equity and ownership opportunities.
- Promoting job satisfaction, particularly for top performers: Movers are looking for more support from their firms. Consider offering them access to client referral programs and provide firm marketing and business development support to help them build their books of business and differentiate themselves in the marketplace.
To learn more about how to retain and develop advisors and to access the findings from Fidelity’s Future Leaders Study, visit: go.fidelity.com/futureleaders. To access additional insights on recruiting young advisors, check out Fidelity’s Recruiting Redefined study.
About Fidelity Investments
Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.2 trillion, including managed assets of $2.0 trillion as of March 31, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.
The content provided herein is general in nature and is for informational purposes only. This information is not individualized and is not intended to serve as the primary or sole basis for your decisions as there may be other factors you should consider. Fidelity does not provide advice of any kind.
Fidelity Clearing and Custody Solutions provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC. 200 Seaport Boulevard Boston, MA 02210.
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1 Source: Discovery Database, Fidelity Institutional Analysis.
2 Methodology info: The 2015 Fidelity Insights on Independence Study was conducted in collaboration with Bellomy Research from July 16 to August 9 2015, among 692 financial advisors, of which about one-third are high producing (AUM of $250 million or more). Advisors were screened based on having assets under management of at least $10 million, and included advisors who a) had switched firms (Movers), b) had considered a switch, or c) had not considered a move/moved in the last five years. Bellomy Research is an independent third-party research firm and is not affiliated with Fidelity Investments. The study did not identify Fidelity as the sponsor.
3 “Movers” were defined as having switched firms in the past 5 years. “Pre-move” assets were based on responses to the question What amount of assets did you/your team initially bring over to your new firm when you moved?. “Post-move” assets were based on responses to the question What is the total value of assets that you currently manage independently/as part of a team? Calculations for increase in % of AUM pre and post-move were based on responses of advisors that moved 3 to 5 years ago
Source: Fidelity Investments