Phil Waxelbaum, a recruiter with 42 years of experience in the financial advisory industry, founded Masada Consulting in 2012. Since then, he has represented some of the biggest firms in the wealth management business, including some of the best-known names in both the independent and employee channel worlds. Waxelbaum joins us to discuss ways that large wirehouses can still appeal to top-class advisory teams even as many continue to break off for independence.
Transcript:
Dan Shaw:
Hello and welcome to our latest Leaders interview today. It's titled "How Wirehouses Still Make Waves Among Moves to Independence."
My name is Dan Shaw, and I'm a reporter at Financial Planning. I cover both wirehouses and industry regulation. With me today is Phil Waxelbaum, the founder and CEO of Masada Consulting, a recruiting firm he started in 2012.
He's also someone who's seen the industry from the inside and out. Starting in the early '80s, he held field and senior leadership roles at some of the biggest name wirehouses and high networth firms. They include Morgan Stanley's predecessor — Smith Barney — as well as UBS, Deutsche Bank and JP Morgan.
Now in the 42nd year of his career, he describes himself on his LinkedIn page as "a passionate student and historian" of the business. Phil Waxelbaum joins us today to discuss ways that large wirehouses can still appeal to top-class advisory teams, even as many continue to break off for independence.
Well, welcome Phil, and thank you again for agreeing to do this and spend some time with us. I know we chat a lot on the phone for articles, so now everybody gets a little insight into how that goes. But one of the things we talk about — and a lot of people talk about who cover this industry and are in this industry — is the move to independence. It makes for an interesting trend story. And, of course, journalists love trend stories.
But sometimes I've had reason to wonder if some of this is exaggerated. So Cerulli, for instance, in October released a report that I thought was pretty eye-opening. They said that 58% of all retail client assets and wealth management assets are still housed at the top 10 largest broker-dealer firms. And of the $26.9 trillion the industry has under management at the retail level, $16 trillion is at those firms. And we're talking about Morgan Stanley, UBS, Wells Fargo, Merrill Lynch, JP Morgan, Goldman Sachs, and you can just keep on adding names there. But they're names that we've all heard of. So I guess my first question for you is: Do you think the wirehouses are really losing ground here?
Phil Waxelbaum:
It's an interesting question, Dan, and the Cerulli data is a mixed bag. So Cerulli has made two reports on body count. It looks like it's fighting to a standstill. There appears to be no one hopping the fence.
Now, that's one way to count. The other way to count is dollars in assets under management, where Cerulli has determined that for every dollar decline of wirehouse assets, there appears to be an almost perfect $1 increase in assets turning up in the independent side of the fence, both IBD and RIA.
So if I'm in the financial services business, which I am obviously, what's more important to me? Body count or assets under management? So there is a flow of assets under management.
None of these statistics are highly reliable. The problem that we all have is the data is opaque. Even when we look at FINRA data, they don't report accurately. They don't report at all movement of one advisor to another firm, to another broker-dealer affiliation or an absolute measurement of advisors who've remained in the business but have left FINRA and moved to an SEC or a state RIA-licensing structure.
So all of this is anecdotal and we all collect as big a pile of anecdotes as we can to try and come to a conclusion.
But I'll reference you back to still yet another Cerulli study of a year or two ago, where they did a broad survey of advisors and their look at the industry, largely opinion-based. And over 70% of advisors who are currently in an employee-channel environment expressed a positive interest in the independent part of the business. Not necessarily saying that they love it. But they had a positive outlook for the independent side of the business.
And in general, the rule has been roughly 3% of the total registered broker population does hop the fence on an annual basis. So it's a slow bleed. It's not a hemorrhage, but it's palpable and it's obvious.
Dan Shaw:
So just anecdotally, and from what you're seeing from this, it does seem like the wirehouses are losing a little bit of ground if their goal is to have a bigger headcount and more assets under management. Which, of course , it is. So, amid all this, what can wirehouses do? What should they be doing and what are they doing to prevent themselves from losing ground?
Phil Waxelbaum:
That's a fascinating question. I would tell you we both could probably make a lot of money if we came up with a great consulting value answer. Because, heaven knows, some of the firms that are watching this today are confronted with exactly that problem. So we all know the travails of Merrill Lynch over the last two or three years. And you make sure that you crack the media open on Friday afternoons to see who went where.
Certainly Wells Fargo went through a multi-year experience of departures over reputational issues that are now long in the rear-view mirror. And the further they go back in the vanishing point, the less it's impacting. But it's still there.
So what can they do to keep people? Well, the big challenge that we have in the wirehouse environment is the wirehouses were historically the industry innovators. So we can look at innovations that everybody knows: The centrally managed asset account, commonly known as the CMA, that was a Merrill Lynch invention. The problem is that was a Merrill Lynch invention 40 years ago. That ain't new and it's table stakes. Everybody's got it.
When we look at managed money or what we now refer to as fee-based asset management, that was invented by EF Hutton, legacy now to Morgan Stanley. Also invented 40 years ago.
So these are the two biggest events of the last 50 years in the financial service industry. That following right off of what we referred to as May Day, which is when the New York Stock Exchange allowed member firms to discount commissions and have negotiated commissions. At one time, they all had to charge exactly the same thing and they could only compete on service and brilliance. Then they could compete on price, which opened the door for all the other stuff that we know is now price driven.
So it's really a hard question, very hard question about what do you do to keep people in their seats. So the easy answer used to be compensation models. Build a better compensation model and advisors will stay in the seat and you will attract advisors from other components.
To make this answer even more complicated, and we'll talk about it throughout our time together today.,I've made note of a phenomenon, which everybody else is. I'd like to tell you I'm the only person watching. But I think sometimes the king has no clothes, is the obvious (observation) from the one not terribly well-educated little kid, and I'm going to position myself as that little kid.
We are working with the highest net worth population of advisors we have ever seen. The advisors in our industry right now are more wealthy than any of their predecessors. They're financially stable. They've got great personal balance sheets.
And the real question becomes: How do you appeal to someone who is financially well off? And really it defines their business, their life quality, not necessarily quantity. So all big producers want to become bigger producers. All small producers want to become big producers. But there's a quality of life component that's more important now than ever before. And if you had to define what the wirehouses need to do, they need to exercise those levers that enhance quality of life. And very few of them are doing it.
And by the way, that wealth item that I covered — about how wealthy advisors have become — I'm sure there are some watching today going, "Wait, wait, wait a minute, not me." Well, yeah, in relative terms, one of the things I will tell you, I rarely ever have an advisor come to me seeking to make a move because they need money. People want wealth. People want a better quality to execute in their environment or a better environment in which to execute.
But if you went back as recently as 10 years ago, 12 years ago, we had advisors who needed money. They needed what they used to refer to, many of them, as a reload. It was taking a new investor into their business so that they could continue their growth or perhaps even keep their doors open. We don't see that at all anymore there.
There's roughly 350,000 FINRA registered persons who are client-facing. There's over 600,000 registered persons. But that other 250,000 plus are back office personnel, field management, field leadership, headquarters leadership. So of those 350, they've escaped poverty dramatically.
So I'll pull a circle around, and I know I'm getting you way off of your question expectation, Dan. But what happened — and it was the phenomenon of zero interest rates during this 12 year, 13 year gap — cash was trash. You were either invested or you were collecting zero. So that flooded all investment vehicles that were potentially fee-based with progressively more assets and all of these fee-based programs and even the second-tier quality providers blew up.
And all of the advisors who had left the brokerage commission space and had committed more and more and more client assets to fee-based business got on board at the same time. Now, couple that with out of the depths of 2008 through to 2024, it is arguably the longest once-a-century event.
But if you back the pandemic out, this is the most extended bull market on record. You can go back to the Civil War. So you've got a flood of money going into a business that goes autopilot once the money is invested because the market lifts the boat. The advisor fees have remained relatively flat over this entire period. We still hover the 1% on equity space.
So it didn't take a rocket scientist — I'm not picking on anybody please, there are some very smart people listening to this today — but you could be a very average intellect, someone like me, and have figured this one out and done extremely well for yourself.
Your only requisite was your ability to attract more money. So that's a long background to a short question: How do wirehouses do it better? They have to convince their advisors that they have the better mousetrap, that they provide a better system for them to capture client assets, that they can provide them with a cultural bias to the clients that they're marketing to that, "I want to be with this firm. I want my money invested at this firm."
And then they need the advisor to feel like this is a really great fun place to work. The staff is great. The back office gets stuff done. Nothing ever lingers on for days and weeks. My branch manager loves me and can't wait to figure out how to help me every day. He or she lives for that moment that they've helped me. I'm taking these things to the extreme because we know we're never going to get all of them.
In some cases we're never going to get any of them. But these are the things that need to be done. So another article that we're in, in Financial Planning today, referenced one of the leaders, Lindsay Hans at Merrill Lynch, talking about the continued demand for more advisors because of the great retirement. Well, that's true and not true. Two years ago, Jim Gorman over at Morgan Stanley, a competitor, was really excited about the concept of robo-advisory. Now you're a reporter. I'm going to turn a question on you. When was the last time you saw a need to cover the latest robo-advisory?
Dan Shaw:
Right. Well, it's funny you asked that because we covered that JP Morgan closing down its robo-advisor.
Phil Waxelbaum:
It's a failed concept. What people figured out is that the high net worth world and the ultra high net worth world doesn't move the needle on a robo basis.
So AI, OK, I want to see some slick AI that can give me a competitive edge on hedge funds. We used to call it the black box. Now we call it AI. But robo just doesn't resonate.
It resonates somewhat at Schwab. It has receded there as well. It resonated somewhat at Fidelity and Vanguard and the mass market players. But it still comes back to the same values that advisors cherished in the '80s and the '70s, which is quality of life and a smarter answer to questions.
Dan Shaw:
Yeah. I mean, getting off the script here a little bit, do you think Wells Fargo, for instance, they have that independent channel finite. Do you think that that's going to be something that more firms have to look into to strike that balance that you're talking about, where you do have some of the amenities that come with being independent?
Phil Waxelbaum:
Well, look, full disclosure: I do represent Wells Fargo and I'm a big cheerleader fan, particularly at this moment in time. And we'll talk about that more later in the conversation. But they're not alone.
So we look at Wells Fargo and we ignore Raymond James. We always operate on the basis that Raymond James is a regional firm. Well, they're an 11,000-plus people regional firm, which makes them bigger than at least one of what we consider the wirehouses. They're bigger than UBS on a headcount basis.
They're in the same furlong as Wells Fargo, so they're real. Well, Raymond James has an independent channel and a robust one. Ameriprise is not far off pace. So if I'm calling a horse race among firms that are multi-channel. There's really three of them that have big footprints in all three markets. It could be argued actually that Ray J and Ameriprise have larger independent populations than Wells does. So the question becomes: Do Morgan Stanley, UBS and Merrill Lynch adopt this premise?
Dan Shaw:
Yeah, right.
Phil Waxelbaum:
Two years ago, Stifel resurrected what was Century Investors and took the bold step of even rebranding it Stifel Independent Advisory Advisors, which was a big step for what is a very proud employee-channel firm and a very successful employee firm.
The answer to your question is: I don't think so. I think that ,culturally, Morgan, Merrill and UBS have a cost structure and an infrastructure that demands that their advisors be serviced in an employee channel. You'd have to make huge changes to structure to make it really viable. As a rule of thumb, the margins in an independent broker-dealer channel are roughly half what the margins are in an employee channel firm. So employee channel firms right now target roughly 24% margins and the independent channel space, they target 12 to 15.
Dan Shaw:
Okay. Yeah.
Phil Waxelbaum:
Before we get carried away and cry for all of the people who are running independent broker-dealers, remember businesses also have to be measured on return on equity. So if you look at the barrier to entry, the cost of having a wirehouse that has trading facilities, inventory investment banking research — that's expensive. So the return on equity in the independent broker-dealer space in the RIA space may actually be as good or better than it is in the wirehouse space. So they're in the same business, but they're not in the same delivery mechanism, not even core.
Dan Shaw:
So if it's not obvious what wirehouses can do to retain people, what are the biggest complaints about wirehouses? I mean, not to say anything too obvious here, but I don't think we've listed the biggest complaint if it's not pay. Because, going back to your point that people aren't poor in this industry anymore.
Phil Waxelbaum:
We've got, again, another very deeply multifaceted question. The challenge associated with this comes down, the word culture is just abused, so abused. If I use the word culture, please hit a buzzer or something and make me stop. My neighbor's dog is barking in the background, so I apologize for that. She too, apparently is not happy with the way things are going. What are advisors unhappy about?
Nobody feels, or generally few people feel, like the firm is operating totally in their clients' best interest every day. There's a constant challenge between the firm acting in its best interest and its shareholders' best interest above that of the advisor and the client. And it's only gotten worse. It hasn't gotten better. That needs to be overcome, and I'm really at a loss as to how you overwhelm that.
It's been a slow atrophy. One of the issues that I have, and sometimes this is a function of business cycles ... so I made a comment earlier about how this modern era really started in 2008. It's now — what's that? —16 years old.
One of the things they did in 2008 is many firms shut down hundreds of branches, closed them, consolidated and reduced footprint, tried to reduce headcount just to try and survive what was the greatest financial crisis since the Depression starting in 1929. We never saw anything like this before. It is the absolute black swan event.
So they took extreme measures. Well, one of the extreme measures of course was, as I pointed out, reducing headcount. One of the headcounts that they reduced was field management. You had very seasoned 20- and 30- year field branch managers and regional directors and divisional directors who were excised. They were retired, some cases they were far from retirement age. But these were really experienced people gone from the management ranks.
Then we went through a period into 2012, 2013, before we started to replenish our ranks. So there's a five-year lost generation where we would've otherwise done a great job of adding talented people, bringing them up through the ranks and making them really good leaders. So what we're confronted with is we're just now starting to get some of those people that we brought into management ranks in 2013, 2014, up to their capacity.
So that's got to continue to mature. And one of the things that I don't hear senior leadership in headquarters talking about very much with the exception of perhaps Wells Fargo, I think Sol Gindi has made this an absolute priority at Wells, is the evolution of their field leaders. We can't continue to have average field leaders. We've got to get back to a generation of great. and I'll define that for a lot of your listeners and viewers today.
I can remember when advisors changed firms because they loved the branch manager that was recruiting them, and they really believed that this person would be the one who was their guide to the holy grail. And, if you notice, firms don't recruit necessarily with people anymore. They recruit with firm values, firm culture.
I had the president of Smith Barney at one time — I won't tell you what his name was because there'd been a bunch of them — but one of them made a comment to me once. He was accusing me of causing my advisors — I had not lost an advisor from any of my businesses for nearly six years, which was a bizarre concept at that moment in time — but he said, "Phil, you really overdo it with creating loyalty to yourself versus loyalty to the firm."
This was critical analysis. And my response to him was: No one has ever followed a flag into battle. They followed the person who was standing next to the flag or carrying the flag. But it wasn't the flag.
We've gotten really flag-centric and we need to spend a lot more time developing our leadership talent. It's a critical, critical event, certainly in the employee channel.
Dan Shaw:
Yeah, an interesting point, and you could probably argue too, that the names, the firm names don't mean as much as they used to either. Well,
Phil Waxelbaum:
I refer to it as the hundred years' dead event. We got a bunch of firms out there that have really great names, that are all named after someone who's been dead for at least a hundred years. Yeah, you're right. It doesn't mean anything anymore.
Dan Shaw:
Yeah, most people probably know who JP Morgan is, but Merrill Lynch, those names have probably been lost to history a little bit.
Phil Waxelbaum:
You know what you can't do is you can't find an advisor who tells you, yeah, I remember when I used to come to work and John Pierpoint would be there before me.
Dan Shaw:
Old man Morgan would come over and
Phil Waxelbaum:
Look, nobody worked direct report to Charlie Merrill is still working anymore either. And John Rockefeller is a story about giving out dimes to impoverished children. I mean, it goes on and on. I don't want to completely belittle these organizations with a point. But unless you evolve the culture that lives behind the name, the name isn't going to save you.
Dan Shaw:
Yeah. Well, I do want to say that I don't have to answer or ask all the questions here. So if anybody who's listening wants to chime in with something in the Q&A box, send the questions in because I would love to forward those on to Phil here.
But we can keep on moving. So yeah, one thing that is always interesting to me is that, of course, you always hear this talk about the need to bring in high net worth, ultra high net worth clients. Is anybody, particularly at these big name firms, going after the retail investor anymore? Do you see much interest on their part in the average Joe?
Phil Waxelbaum:
Yeah, look, absolutely the average Joe is out there. Let's talk a little bit about the quick definitions of wealth. So there's really four buckets of wealth in the financial advisory space. So there's the ultra high net worth. Very few actually address that piece because they are few in numbers.
In the great scheme of things, I define ultra net worth at the bizarre border of a hundred million dollars of investible assets. That's true ultra high net worth. There's not a lot of them around. They're very difficult to capture.
The advisors who get into that space end up with multiples and they make the Barron's list. You don't need a lot of those folks to drive to the top of the pile.
But the next step is the really big piece now, which is high net worth. And high net worth starts, depending on the firm's definition, as low as $5 million and stretches all the way up to that $100 million number that I'm talking about. And I forget what the number is: Are there four new millionaires minted per minute? It's some staggering concept. That's as they're growing. Now, a lot of that is home equity and things like that, not necessarily liquid. But these are people that are millionaires. So that television show, do you really want to be a millionaire?Nobody wants to be a millionaire.
You want to be a centimillionaire. It's kind of like the concept of you walk into the bodega, and the lottery is only going to be $50 million that week. Yeah, I'll pass. Now the lottery is going to be $500 million. Okay, now you have my attention. Really, just 50 wouldn't change your life? It's worth a dollar on a lottery ticket only if it's going to pay 500 or better.
So when we're kind of into that weird space, that part of the market is being addressed aggressively by all of the wirehouses, all of the employee-channel firms. And it is an emerging priority for the independent broker-dealers.
So I will tell you, all of the major independent broker-dealers are examining and refreshing their product offerings to try and help better address that space. LPL, as you know, recently announced that they have created an entire division just to address the unique and special needs of the high net worth to ultra high net worth space. And they had great plans of just having better product access, better access to alternative investments, better access to the construct of derivatives, that are helpful to the portfolios of people who have that kind of wealth. So it's going to dilute to the IBD world pretty aggressively over the next three to five years.
But we're talking about the stratification, and your first question was: Who's helping the entry level? So the next step down is what we call emerging wealth.
And emerging wealth probably is the largest population of all clients in all advisory channels. There's probably more emerging wealth folks. Emerging wealth people are those nice people who have $250,000 to invest, and they climb all the way up to that first address of true wealth at that the five to 10 million range.
In headcount, they are the most important clients of the firm. In impact, they are not. The ultra high net worth are. But if you lost all of your emerging wealth clients, you'd go out of business. They're very important. They're critically important, except to very unique specialty firms. So Rockefeller is living in the high net worth, ultra high net space. First Republic lived and breathed in that space with great success.
UBS very quietly and very interestingly, has shifted progressively further and further and further into that space. And I forget the name of their chairman that, before the acquisition of Credit Suisse, that preceded Ermotti. He had a relatively short tenure, but a successful one. He made comment at last year's — not the 2023 earnings report, but the 2022 earnings report and analyst meeting — that he did not believe that UBS's Wealth Management brought a great deal of Alpha. That was his word, not mine, alpha to the average investor. He essentially said, we don't work on Chevrolets. But if you got a Ferrari, we're good.
That space has happened. So now we start to define down, and now we're getting to the client who has less than $250,000.
And that really is generally the whole next generation of investors. This is what many firms refer to as the incubator investor, who will ultimately get to the emerging wealth space. You don't want to lose them, but you don't want to go so deep as to be overwhelmed by it.
So most of the employee channel firms have account minimums, and that $250,000 number is the typical fence. So John Q advisor sitting in a Morgan Stanley branch can't open an account for a client with less than $250,000 in investible assets. It's not net worth. I mean, this is the first check or the first transfer that has to go into the account in order for the manager to sign off on that account being opened.
If it's less than that, the client still can have the relationship with Morgan. Morgan has built a pretty good incubation system. But it's going to get handled by a call center advisor or through E-Trade, where they can have a direct relationship.
What Morgan has actually beaten everybody at is workplace wealth. So wealth that's accumulated as a result of deferred compensations and 401(k) assets. And as you know, E-Trade was a monster competitor in that space, and they've evolved in other areas. So the critical thing is that they are building an evolutionary hierarchy in their space, and they're doing pretty good at it.
Now, this is not to say that this comparably is not being addressed by Merrill Lynch. Merrill Lynch has their system of both the call centers, but additionally they're very robust in their bank branches. So there's a lot of capture at the walk-through-the-door depositor level. Best in class in terms of capture of assets at the bank level has been, and I think for the foreseeable future, is Wells Fargo.
Wells Fargo has always been the better managed bank channel. It hasn't been fits and starts or bumps in the night. They've had to make some changes over the last decade, but they have the largest population servicing that client base.
And for all of the rocks that get thrown at Wells Fargo when they're not listening, Wells Fargo through this entire event — and again, they are a client of mine, so I speak well of them, but they wouldn't be a client if I couldn't speak well of them — I'll say that they are America's largest consumer bank. There are more moms and pops who maintain their banking relationship with Wells Fargo than any other bank. They're not the largest bank, no. But they touch more people on a direct banking relationship.
So that's kind of a critical value. So is anybody pursuing the entry level? Yes. Now the most robust entities in the entry level, who we ignore completely in our business, are Charles Schwab, Fidelity and Vanguard.
So I remember some years ago reading an article about the day in the life of the chairman of Charles Schwab. And it's all the usual stuff that you expect of a highly successful individual. He gets up in the morning, he drinks his 16 ounces of water, he jumps on the treadmill.
He does all of that cool stuff that everybody, Tony Robbins tells you to do. Every Tony Robbins devotee lives their life the same way, and he is up at 4:30 or 5 a.m. — all that standard successful person stuff. But he made one comment that I found really curious. Years ago at Prudential-Bache, it was still Bache & Company, we ran an advertising campaign of an advisor with crisp eyes, but still in his bathrobe, walking down to the kitchen, picking up the phone that was still attached to the wall, dialing wherever he dialed to determine how we had closed in Europe that night. Because it was going to be critical to the entire balance of the day.
So here I've got the chairman of Charles Schwab identifying almost an identical event. Except what he checks every morning when he first gets up is how much money flowed in to the Charles Schwab lockboxes unsolicited overnight. And the numbers were in the hundreds of millions of dollars. Hundreds of millions of dollars! So how do you like to go to your mailbox every morning and there's a hundred million dollars. That's Charles Schwab's life.
Dan Shaw:
Wow.
Phil Waxelbaum:
That's Vanguard's life. That's Fidelity's life. And one of the biggest challenges that we have in both the independent RIA and wirehouse world is the ability to capture more of those assets before they get lost in the Charles Schwab lockbox. It's easier to be at the front end of it than it is to try and lever it back out. We know that the average account size at the Schwabs and the Vanguards and the Fidelitys are very low. They're under a hundred thousand dollars. At one point, we were pretty well targeted that they were under $30,000,. But there were so many of them. It's a Carl Sagan number, billions and trillions. It's crazy. That's the funnel.
Dan Shaw:
I'm sorry. Yeah, we are running short on time here, which is unbelievable. I thought we were OK with 45 minutes. But I did get a couple of questions. I want to get to at least one of them, and we're probably going to have to keep the answer pretty short. But this one comes from Victor Wong: Should offers to advisors with equity components be weighted equally more or less versus cash upfront in your opinion? I can read that again if that
Phil Waxelbaum:
I know Victor really well, and I leave it to him to ask a really challenging question when we've got less than five minutes left. So
Victor, it's an interesting question. It's an important question. More and more we're seeing, particularly in the RIA space, an equity component. So it does address what I had mentioned earlier about advisors becoming more and more wealthy and they don't need cashflow as aggressively as they want wealth going forward. That's one of the greatest drives to independence in general, is the ability to own an asset that is a fungible asset.
So if I own an independent broker-dealer book or I own an RIA book, I have the ability at some point in the future to sell that business for, call it, three to four times revenues or as much as 12 to 15 times EBITDA. But it's a line item on your personal network sheet.
So many firms are attempting to attract advisors into their organizations by offering them equity in the greater organization. Some of the offers are great, some of the offers are not so great.
The real look under the hood is: Is the equity on parity with the other shareholders? ? Is there an A share and a B share? If there's a B share, I'm really cautious about it. I don't want to get diluted because someone in the C-suite made an A share decision and I have no control at the B share level. Some of these are going to be great hits.
So at one point, I ran UBS's business in Silicon Valley. And one of the things I learned up there, is that people who run startups always run startups. They start up one, they start up the next one. Everybody wants to be, in some form, Elon Musk. They want to do Tesla, they want to do SpaceX, they want to do X. I don't know what else he's got on his plate. But there's constantly a startup in their game.
So that's a tough question. We've had a lot of advisors over the years who have gone for equity valuations versus cash and have gotten burnt badly. The firms were mismanaged and they never achieved their equity value. I mean, nothing, zero.
It's not like they got a reduced lever. They walked away with their advisory practice, but nothing for the experience. And I think you really need someone who knows the ropes that can help you pick it apart to figure out if this makes sense or not. So that's a completely shameless plug for the consulting and recruiting community. There are a few people that I think are really good at it, and there are a lot of people that I don't think are very good at it. But I'm one of the good ones.
Dan Shaw:
What about lawyers? Do you think lawyers are important to get involved in some of these deals too? To look over the contracts and
Phil Waxelbaum:
Look, here's my challenge. Lawyers are great. Some of my best friends are lawyers. But a lot of times I've seen contracts sent to lawyers and they make line item changes in contracts that are not going to be approved by the firm. And they charge $400 an hour. And I've never seen a lawyer that's able to pick up a phone for less than $400.
New York City securities lawyers that I would trust charge as much as $1,500 an hour. So I think lawyers are important, but surgically applied. So I think every advisor who's changing firms or changing affiliations should have a lawyer engaged. I think it's a very specific type of lawyer. It has to be a lawyer who is: This is what they do. So everybody's seen the movie "My Cousin Vinny." That's the wrong lawyer. If someone did a spectacular job on the closing of your home, that is not the lawyer that you want to review a FINRA compliant contract. Next time you buy a house, by all means.
But there is a pretty good community of super highly competent people who do nothing but FINRA work. And they can judge whether they can defend what you're doing or prosecute what you're doing at some point in the future. Those people play a critical role.
Dan Shaw:
Okay. Okay. Well, unfortunately we're running out of time here. I don't even know what possessed me to think that we would have trouble filling up 45 minutes because I have a bunch of other questions that I never got around to. But we can always schedule another one of these at some later date.
Phil Waxelbaum:
And Dan, our producers today were concerned that we might come up short.
Dan Shaw:
Yeah, they obviously have never listened to one of our chats before. But yeah, I just wanted to thank you again, Phil, for doing this, taking the time. We really appreciate it here at Financial Planning. Again, Phil Waxelbaum is the founder and CEO of Masada Consulting, a recruiting firm. He started it in 2012. And I again am Dan Shaw. I'm a reporter at Financial Planning. I cover wirehouses and regulatory compliance. And thanks everyone for joining us today, and we'll see you all soon.
Phil Waxelbaum:
Dan, thanks so much. I appreciate you having me.
