Independent broker dealer recruiter Jon Henschen Publishes "BD Deals: When Do Advisors Win, Lose?"

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Jon Henschen's article, "BD Deals: When Do Advisors Win, Lose?" looks at the some of the consequences that can come when one broker-dealer firm is sold to another. Some of the potential points of conflict he points out tend to be service, compliance and culture misalignment.

We’ve seen retention differences repeat over the years as some larger firms purchased by even large BDs have higher retention, while smaller firms purchased by large firms experience lower retention.

Featured November 2, 2022 on ThinkAdvisor.com, independent broker dealer recruiter Jon Henschen’s "BD Deals: When do Advisors Win, Lose?" Henschen shows how when one broker-dealer is bought by another, advisors at the acquired firm hope for the best but wait for what will change. The acquiring broker-dealer will most always start off with a statement such as, “Everything will stay the same.” This may be the case for a month or two; over time, though, this statement often proves to be untrue.

The size of the firm being sold and the size of the acquiring firm can make a big difference in the retention of advisors over the first two years. Potential points of conflict tend to be service, compliance and culture misalignment. "What constitutes high or low retention largely depends on changes in the advisor experiences within the first two years after an acquisition. Advisors at small and midsize firms, often with up to 750 advisors, frequently have close relationships with management and staff."

Henschen also shows how small and midsize firms are able to customize compliance and marketing needs to each advisor, while larger firms require advisors to fit into the compliance/marketing boxes they have created. "Going from a smaller firm to a large firm, the advisor is rarely able to speak directly with management, typically talks to different people via a phone tree or service team, and has longer wait times for service. Flexibility on outside business activities or marketing methods that include more than generic topics are much more rigid at larger firms."

On the point of culture, Henschen spoke with an advisor he had placed with a firm several years prior explained: “After [we] were merged in, the service was atrocious with half-hour waits for a call to be answered, only to get someone who could not answer the question. Call wait times have since improved, but the quality of service remains poor as many of the staff are new in training.”

"In terms of firm culture, she said, 'They are too big to have culture.'"

Henschen notes that the culture misalignment happens when advisors have a strong relationship with management and staff, and a broker-dealer sale results in these relationship bonds disappearing. "Another advisor whose BD was sold to a large firm felt that all the qualities that led him to initially pick a smaller firm were gone. It was like moving from a small town where you know everyone to being forced to live in a big city where you didn’t know a soul."

Jon Henschen is founder of http://www.henschenassoc.com, an independent recruiting firm focused on independent broker dealers and RIAs based in Marine on St. Croix, MN. With more than 30 years of industry experience, Jon is a staunch advocate for independent financial advisors, and is widely sought after by both advisors, broker dealers and RIAs for his expertise and insight on industry topics. He is frequently published and quoted in a variety of industry sources, including Wealth Management, ThinkAdvisor, Investment Advisor Magazine, Wealth Management Magazine, Financial Advisor IQ, Financial Advisor Magazine, Investment News and others.

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Cristi Barkley
Henschen & Associates
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