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Why It's Not Your Father's Wirehouse Anymore

SuperUser Account posted on April 21, 2011

I can’t figure out when the entrepreneurial culture of the wirehouse began to fade away, but it did in fact disappear. Past generations had a completely different experience in the wirehouse environment than exists today. They worked for organizations that excelled at providing value-added programs to both advisors and clients, and moved swiftly to help productive advisors succeed. However, it seems the bigger an institution gets, the stricter it becomes on all fronts. There is very little “value add” anymore, and as a result many advisors are leaving the wirehouses for more entrepreneurial business models.

Industry veterans can remember the good old days. It was a very different experience in the 1970s, 1980s and early 1990s, when wirehouses would hire potentially great sales people and provide them with great sales training, helping them win new business from prospects. The trainee would be thrown in the bullpen and start cold calling. If an advisor was good at winning business from prospects and had a strong work ethic, they would start to have success. The firm would be there every step of the way to help the advisor close with new clients, until the advisor could start out fully on their own. If the advisor was motivated to be successful, the manger would bend over backwards to help the individual achieve greatness.

The branch manager had a lot of authority in those days, and a big budget, too. He could spend money on those that deserved it and starve the slackers. If an advisor wanted to hire an intern or a cold caller, all he or she had to do was ask. If the advisor wanted to fire a bad sales assistant, that underperformer would be gone in a few weeks. When it came to marketing the advisor’s business, it was very simple to get approvals and the firm would even pay for sales leads. The firm was there to do the advisor’s blocking and for those that were motivated and talented, they could go far fast.

Today, though, the business is very different. There are too many internal rules and regulations and firms don’t reward the best and hardest working advisors. Everything has to be fair and equal. Wirehouses can’t give a cold caller to the best performer, because then you would have to give one to every advisor – and that is never in the budget. Compliance has gotten out of control. Now, instead of ensuring the advisor’s side of the story gets told, in many cases the advisor is thrown under the bus. If you have a really bad sales assistant, good luck getting the individual fired. That now can take years to accomplish, as it sometimes feels like human resources is running the company.

These firms still have training programs, but now they spend most of their time training new hires on how to be great financial planners and very little training on how to really sell the advisor’s value proposition to prospects. What you end up with are advisors who can construct an asset allocation plan, but who have no idea on how to get a new investor to trust them with their money. Further, handing out marketing dollars to the hardest working advisors no longer exists. Now there is often a formula that gives $2,000 a year to the biggest producers. If a branch manager has a really motivated young advisor, it is hard to give them the financial support the manager would like.

These changes have caused many branch managers and advisors to become very bitter over the past decade. They no longer have the authority to make the big decisions. Branch managers and advisors have been told “no” so often that some have stopped asking. The ones that are risk takers have moved on to greener pastures. The ones that have stayed have done so for one of two reasons: either they love having the big investment bank name on their business card, or they are afraid of the unknown.

But it does not have to be that way. Wirehouses need to give branch managers the authority to run their branch and make local business decisions. These firms also need to make every back office employee know that they are there to serve the advisors. Without the advisors, they would have no job. Compliance will always be important, but advisors are too. Overall, it will not take much to make the wirehouses the place to be again. In the end, we all want the same thing from our firms – either block or get out of the way.