Who owns the clients in a Financial Planning business?

One of the main questions I am asked by employers when recruiting for Financial Advisers is, can the Financial Adviser bring across clients? While this request may seem harmless, it holds a lot more to it than at first glance, it raises the question “who actually ‘owns’ the clients”?

When businesses are hiring a Financial Adviser, they consider the cost of employment and the potential of the hire to generate revenue long term. To ensure this potential, employers prefer Financial Advisers who can bring across a book of clients.

To stay competitive, this request usually comes through from boutique financial planning firms. Bringing on a Financial Advisers with a book of clients creates significant value for the firm with a surge of growth and potential revenue. Because of the potential gains to the firm of hiring a Financial Adviser with a book of clients, it can be a dealbreaker in the recruitment process if the candidate cannot deliver on this front.

Financial Advisers who are asked to bring clients across to their new employer find it difficult to see the benefit it will have on their employment and instead tend to focus on the risks of doing so. This leads to most Financial Adviser candidates being unwilling to deliver on the request.

Generally, Advisers have non-solicitation clauses built into their contracts. The existence of these clauses raises legal concerns, with many citing incidents regarding ex-colleagues who have experienced costly legal battles when trying to move clients.

There are also ethical concerns around moving clients from a previous employer. Financial Advisers once again carry the risk of moving clients by possibly damaging the relationship with their previous employer. Financial Advisers may feel this could also harm their reputation in the market and prospective employment opportunities in future.

Many advisers are not willing to consider roles where there are high expectations for candidates to bring in new clients when hired.

Rather than asking ‘who owns the clients?’ a more suitable question to pose to businesses with this request is ‘are you buying a business or are you hiring an Adviser?’.

Advisers want employers to see the value in them, not just the value of the clients that they can bring across. Therefore, businesses who are willing to consider and hire advisers who cannot bring across clients can guarantee a larger talent pool of applicants.

With no easy solution in sight the best approach may be to separate the buying of client books and the hiring of Financial Advisers. Forgoing the benefit of a potential new book of clients in the recruitment process also forgoes the legal risk and ethical concerns surround this issue.

Usually when Advisers promise they can deliver a book of clients they overestimate how many will come across as it can be protracted administrative process. Clients will usually follow a trusted adviser with a solid track record and reputation if the firm they remain with is not providing the same level of service or quality advice.

For further information on fiancial planning roles in funds management and superannuation, please contact Simon Gvalda on 0412 122 593 or simon@kaizenrecruitment.com.au.

Kaizen Recruitment specialises financial services recruitment across funds management, wealth management, superannuation, investment consulting and insurance. We are based in Melbourne and Sydney. For assistance or further information please telephone our office at +61 3 9095 7157 or submit an online form.

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