The Right Way to Think About Up Front Money
(I’m Mike Gordon, independent recruiter and transition consultant. I help match successful advisor-owners with better RIAs, BDs, and OSJs. You work with me when you want an experienced advocate to guide you through firm research, vetting, and negotiations. I’m the Advisor’s Advisor.)
There are two advisors this industry loves to talk about.
The first one moves primarily for the upfront money, collects a check, and calls it a business decision. The second one treats any conversation about transition economies like a personal insult. They’re too principled for the payout discussion.
Both are exhausting, and neither is the advisor I spend most of my time with.
The advisors I work with want to understand how the upfront economics factor into a decision that also involves fit, long-term economics, culture, service, and shifting corporate priorities. Here is how I help them think about it.
1: How Can I Re-Invest It?
The advisors I have seen use transition money best treat it exactly like what it is: a capital event. They invest in growth, hiring, marketing, expansions, acquisitions, etc. The check is meaningful capital, and, like any good entrepreneur, my advisors are thoughtful stewards who put it to work.
2: What Am I Giving Up in Taking It?
More upfront money almost always means longer commitment terms, tighter exit provisions, and less flexibility if the experience does not match the pitch. This is also true of other financial incentives like taking down office space. The more you receive, the more the terms will understandably limit your independence. That can be fine, but I frequently see advisors regret that trade.
This matters more in the wake of the mega-M&A activity we’re seeing. I watched advisors take Commonwealth's aggressive recruiting packages in the years before the LPL acquisition without fully understanding what they were signing. When the deal closed, the platform was now on a short track to change. Quite ironic for the many ex-LPL advisors who went to Commonwealth shortly before the change.
Before pushing for a higher number, I want every advisor to understand exactly what they are giving up in proportion to what they are getting.
3: The Succession Plan
For a growing number of advisors I work with, the economics discussion is not just about a recruiting check. It is about enterprise value with options like a partial sale now, a succession structure later, or a full liquidity event as part of a larger transition plan. That is a different conversation from the traditional recruiting package, and it deserves to be treated as one. Don’t confuse the two.
4: The Personal Part
Not every advisor taking a check is making a purely strategic business decision, and they do not have to be. I have worked with advisors for whom a liquidity event came at exactly the right moment, personally. I’ve seen advisors use this for everything from shouldering sudden needs for aging parents to recapitalizing after a divorce. Not ideal circumstances, but they work. On a lighter note, it’s also fun to see advisors designate part of this money for great staff bonuses.
Knowing Your Variables
I help advisors answer questions like:
What kind of transition assistance are you seeing for businesses like mine?
Are there certain kinds of businesses that offer more, and what do they ask for in exchange?
Based on my experience, am I considering paying for too much support and giving up control?
Can you help me source and compare different recruiting pitches so I can consider real data? (Discretely, of course)
Ready to get a better read on your options? I help dozens of advisors just like you every year find their next move. Click here to schedule a time with me.
— Michael Gordon
Independent Transition Consultant · themichaelgordon.com