Prepare, Protect, Position: How to Keep Your AWAs from Running Off with Your Clients

associate wealth advisor leaving

The fear is becoming more real among advisors that it almost needs an official “phobia” suffix attached to it. We’re talking about the fear advisors have of their associate wealth advisors (AWA) leaving the firm and taking clients with them. The fear is so stifling that some advisors hesitate to hire an AWA in the first place. This is a huge mistake on their part. The industry is consolidating, firms are growing and the need for AWAs is growing. You’d be doing yourself and your firm a disservice if you let this fear win. If you want to grow your business, you need AWAs. AWAs create capacity and enhance the client experience, and their entrepreneurial spirit and skills for generating business are crucial to growing your firm. But AWAs could also pose a threat. At some point, their entrepreneurial spirit might convince them to leave and become an independent advisor. You can’t control if a team member decides to leave. However, you can prepare your firm for the worst, protect it if someone does leave and position it to continue down a path of growth. You might be in the market to hire your first associate wealth advisor or you might’ve already experienced an AWA leaving. Whatever your experience level with AWAs, tweak these best practices to fit your firm and then implement. At the end of the day, those who implement win.

1. Hire the Right People

If you’re reading this because you’re considering hiring an AWA for the first time, you’re in luck. Lessening the likelihood of someone leaving starts with hiring the right people. The two biggest reasons advisors hire the wrong people: They lack clarity on what they need and too often view the world through their own eyes. Too many advisors look for people who are like them. Instead, they should be hiring people who complement them. Hire for the skills you lack. Next, hire people who culturally fit into your organization and who have a sense for what’s going on in your business and the industry. You want a team that shares your values and will grow with you – and who are aware of the industry trends that make it difficult to be a solo advisor. Between rising client expectations and shrinking margin compression, it’s a wild world without a firm behind you. Compare hiring AWAs to a college coaching staff. For some, becoming an assistant coach is a stepping stone to their ultimate goal of becoming a head coach. But there’s only so many head coaching positions. Would you rather be an assistant on a team that’s competing for a national championship every season or a head coach for a unknown team from a lower division?

2. Get Legal Agreements in Place

Aside from the standard legal agreements, include clauses that address the compensation an associate wealth advisor would owe you if they ever leave with your clients. You’d be misguided to not have an agreement. The severity of these clauses should reflect your culture, management style and values. Sometimes the fear that there’s a signed agreement is more powerful than the agreement itself. Carson Coaching shares a 13-page sample agreement with members that outlines potential language to include in a non-competition section. Advisors can prohibit their employees from engaging in business in a specific geographic area, industry or customer list. All advisors need to consult with compliance, an attorney and business development (if applicable) when creating a legal agreement. The final agreement needs to conform to any state laws, match the culture of their firm and protect them to the fullest the law allows.

3. Position the firm as the owner of all client relationships

The firm drives the value clients receive. It’s because of the firm and its resources – the investment committee, planning department, technology, etc. – that an AWA can deliver a robust experience. It’s important to remind both your clients and AWAs of this. Coach your AWAs to tell your firm’s story when they’re selling business. It’s a winning scenario for all parties. They get the name of an established brand to generate more business than if they told their personal story. And your clients will come aboard knowing the value of the firm over the individual advisor. Your AWAs will be less likely to leave because they can generate more business selling the firm’s story. And your clients will be less likely to leave if an AWA does because they realize the experience they get comes from the firm.

4. Compensate appropriately

As your AWA starts to become self-sufficient and generate business on their own – to the point where they’re so self-sufficient they might be tempted to leave – reward their success with additional compensation. Increase compensation to reflect their success. That’s when you offer them an equity component. This is good for both your firm and your AWA. An associate wealth advisor can have equity participation multiple ways, but be sure to have separation clauses in an equity agreement to protect your firm if they do leave. If an AWA leaves under good terms, their shares are paid in full valuation. If an AWA leaves under unfavorable terms, equity valuation might revert back to a previous date and not include increase in firm value. This financial loss is more about opportunity lost than dollars, but a loss nonetheless. You want to find the balance that allows them to participate in firm success and protects your firm from their departure. Lastly, you might even hire a Relationship Manager to help them maintain their business. The Relationship Manager keeps your self-sufficient AWA focused on serving their best clients and growing the business. They are happier and more protective. Compensation should slowly increase up to and including equity. Being part owner of a business will encourage them to treat it as if they owned it. After all, have you ever washed a rental car?

5. Educate them on why they’re better off with you

Share your value proposition with your clients and AWAs. Show – and tell – why they’re better off with you. Advisors can improve the most in this area, and very few do this at all. I ask advisors who have children if their kids put their dirty laundry in the hamper after being told only one time. The answer is usually no. They need reinforcement and reminders for it to become a habit. With AWAs, you need to reinforce the message how difficult it would be to go solo. Educate them periodically on their compensation and industry trend. But do this only when the timing is right – you don’t want to smother them. Don’t let all the good you’re doing for them go unnoticed. Remind them the success they’re having is largely in part because of your firm. Don’t let them take anything for granted.

6. Address AWA performance before it becomes an issue

Don’t let bad relationships fester to the point where the associate wealth advisor leaves angrily on their own and tries to take clients with them. If you sense friction between you and an AWA, repair that situation immediately. If you sense there will be no change, it’s important to sever the relationship early so the AWA leaves on your terms and the situation doesn’t escalate – or worse, gets noticed to your clients.

7. Try to always have a capacity for growth and sudden departures

Hire someone before you have an actual need. If you’re a growing firm and you wait until you have a need, it’s too late. Get someone in the door so when the business comes, they’re prepared and you’re not scrambling to train and onboard them. Stay ahead of the capacity curve and your firm will continue to grow. This also gives you capacity so if someone were to leave, you wouldn’t be drowning in work. You’ll have the ability to retain clients who might have left with the parting AWA. If you’re strapped, your clients will notice. Don’t give them any reason to leave. Even if you implement all the above strategies, will it eliminate any chance an AWA will leave? No, but you’ll minimize the likelihood they will leave and the damage your firm will sustain if they do. If you’ve had an AWA leave before, don’t become twice shy now. If you want to grow your firm, you need AWAs. Get back in the game, but come with a better strategy this time. 

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