• Richard DeSalvo

A Fresh Perspective

Making the Decision to Transition Firms and Confirmation Bias


Early in our wealth management career, we learn that the higher our payout on Gross Dealer Concession (GDC) or Advisory Fees, the more money we earn.


After each sale, we instinctively do the mental math and measure our professional success by level of payout. Each year, when a new compensation plan is devised, we flip to the last page of the document and see how the “grid” was changed. It’s these modifications that in turn determine our sales behavior.


As you try to provide what’s best for your clients, the “grid” may encourage you to prioritize products that are less than ideal. Your fiduciary ethics are stretched thin and that can compromise your professional success and personal satisfaction. So, you decide to look elsewhere for a firm that balances fiduciary freedom and higher payouts.


Once we become open to the possibility of transitioning to a new firm and begin looking for our next professional relationship, we may experience confirmation bias.


We often focus what we have been trained to prioritize:

  • How much is my payout going to be?

  • Do I get any upfront money?

  • What are my other expenses that lower my take home pay?

  • How long is my contract?

  • What are the claw-back provisions if I leave before a predetermined time?

These questions, although important, are just the tip of the iceberg.


Other key points may include:

  • Fundamentals of the RIA or Broker Dealer

  • - Assets under management

  • - Number of advisors

  • - Organic and inorganic growth

  • - Level of entrepreneurial support

  • True fiduciary status

  • Talent of the executive team

  • Self- funded vs. private equity

  • Technology stack

  • Revenue sharing

  • Platform costs and other expenses

With so much to consider, it is normal to take shortcuts and only focus on the positives. While this may make us feel like we made the right decision, it may not be the most informed choice. Even when we have all the facts, we may still act against ours and our clients’ best interests because of confirmation bias.


My suggestion is to start with a clean slate. Although you may have had years of success and accomplishments, start your firm search with a fresh perspective and be open to anything. Be a great listener and learn not just what a firm does, but the why they do it. Challenge the premise of statements that seem too good to be true.


Important questions to ask:

  • How can you offer such a high payout and still make money?

  • How can the platform fee be free and still be profitable?

  • Are you transparent with your ADV, highlighting any conflicts of interest, revenue sharing, etc.?

Finding where the margins are buried exposes hidden objectives and will affect your income and clients’ access to a quality offering.


I understand when writing these words, it is contrary to what you have learned in the wealth management space. There is an adage that states, “if you change the way you look at things, you change the thing you are looking at.”


Start fresh and have a new perspective. Don’t just make the right choice in your transition, make the best choice for you, your family, and your clients.


Rich DeSalvo

COO

F3 Logic, LLC


Where Fiduciary Freedom is First

Advisory services are offered through F3 Logic, LLC, a registered investment advisor. Securities offered through Independent Financial Group, LLC, a registered broker dealer. Member FINRA/SIPC. IFG is not affiliated with any of the entities listed. Additional advisory services may be offered by the respective entities listed as permissible by state law.

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f3Logic, LLC. | 2020

11980 Portland Avenue South, Burnsville, MN 55337

 

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Investment Adviser Representatives offering advisory services through f3Logic, a registered investment adviser. Securities offered through Independent Financial Group, LLC (IFG), a registered broker dealer and a registered investment adviser. Member FINRA/SIPC. f3Logic, LLC and IFG are unaffiliated entities.


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