I’ve never won the lotto.
I once found a $20 bill in a Target dressing room and thought I was on top of the world.
That’s about the biggest cash prize that I can brag about.
That is until a certain event changed my life…….
As a financial advisor who has been busting my butt for many years, it’s very exciting to finally see your paychecks grow.
Starting off, most financial advisors don’t make jack.
Heck, most are lucky to survive in the first year.
In my training class of 50+, only half made it through the first year. Somehow, I survived. 🙂
I had been growing my business for over six years when I received an unexpected phone call from one of my coworkers before work. It was very unusual for him to call so early.
He quickly asked, “Did you hear the news?”. I hadn’t a clue what he was talking about.
He had called to let me know that the firm that I had been working with for my entire six-year career had been bought out.
I really had no idea what that meant, though I did know that change was on its way.
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How the Biz Works…
When I got to the office and was talking with some of the other advisors who had been there for a while, they quickly educated me on how the business works and the potential that we would get a retention bonus.
Having a military background, I equated a retention bonus to getting an upfront check but then also having to sign my life away for X number of years. In the military, that usually meant either three or six years. The financial services industry is very similar.
While in Iraq, I had balked at a tax-free re-enlistment bonus of $15,000. I would have had to resign for an additional six years. I had concluded that I could sell lemonade over the summer and accumulate $15,000 over the six-year period and wouldn’t have to worry about being shot again.
What I quickly learned was that being a financial advisor is a very lucrative position. When your firm gets bought out, the acquiring firm will pay you a bonus to keep you and prevent you from being lured by a competitor.
It was very hard to digest this because I know that a lot of people, when dealing with buy-outs of their company, are usually very worried. Most stress about the fact that they may not have a job anymore.
In our situation not only do we have a job, but we also get a bonus check for staying.
Ridiculous, huh? I agree, but I’m not complaining.
Competitors Come Knocking
As the buy-out process continued, I learned something else. Not only will your new company pay you a handsome bonus for staying, but competing firms will pay you even more if you agree to come on board. One of those companies was Merrill Lynch.
Merrill Lynch had contacted one of the top advisors in our office and was trying to solicit both of us to jump ship and open a new branch office in our town.
I have never been recruited before in my life unless you count the National Guard recruiter who came to my house to sign my contract. I assure you his recruiting tactics weren’t nearly as sexy as what Merrill offered. We got the whole shebang.
We were flown out to New York to visit their downtown headquarters and offered rooms in the Ritz Carlton. We toured New York City in a Cadillac Escalade with our own personal driver. We dined at one of the finest restaurants in downtown New York.
At 29 years of age and living in the Midwest, I was in heaven. Merrill wasn’t only offering fine dining to try to get us to come over, but they also were enticing us with a big, fat bonus check.
I will say that the amount they offered me was nowhere close to what was offered to the other advisor, but once again, I was 29 years of age. I was making roughly $70,000 a year, so any check, especially a large one, was extremely attractive.
Seeing Dollar Signs
The offer that was on the table was that they would give me $198,000 upfront if I were to come on board. Of that check, 70% would be cold hard cash that I could deposit into my checking account, and 30% was Merrill stock that I could sell after it was vested. This check did not include any income that I would make for the upcoming year.
Realistically if I were to maintain my current salary, I would make over $200,000 for that year – almost triple what I had made the previous year!
Oh wait, it gets better….. If I were to hit certain target numbers over the next several years, the back-end compensation could be an additional $300,000 to $400,000.
To sit here and try to make you believe that I didn’t have dollar signs in my eyes would be an absolute lie.
I was sold.
I was more than sold.
I was ready to bolt.
Luckily, I didn’t make any rash decisions and I took some time to think about it more.
What Turned Me Off
One of the items that turned me off about the offer was I had to sign a seven-year contract. If I ever wanted to leave and do my own thing, I would have to pay back a portion of the bonus I received.
Another turn-off was how Merrill treated their smaller accounts. For any client that didn’t have at least $100,000 invested with us, we wouldn’t make a single dime on anything we did with them. Even if a client was an active trader, but their account was only, say, $75,000, I wouldn’t make a single penny if I were to execute a trade for them every day. On the flip side, if I referred my smaller clients to Merrill’s Call Center, then I would get paid, albeit a smaller percentage.
I live in the Midwest, in a small town with a population of 30,000, and I have several clients, even to this day, that have less than $100,000 with me, and I’m more than happy to work with them. These are friends, family members, and individuals that I’ve built personal relationships with, and the thought of having to turn them over to a call center totally turned me off.
Still, the upfront check and the financial security that I felt it would give me and my family was impossible to ignore. In my mind, I wanted to go. As I mentioned, Merrill wasn’t so much as interested in me as they were the other advisor they were recruiting; I was just along for the ride. Oh, what a ride it was…
After a few weeks of deliberating what was a major decision for the both of us, the advisor I was hoping to partner with decided not to pursue Merrill and stay put.
I felt like how the Cleveland Cavalier fans felt when Lebron James decided to take his talents to South Beach – I was crushed. I was thoroughly and utterly depressed.
When I found out the news, I remember leaving the office for the day and just going home and sulking. How pathetic, right?
After internalizing the events that played out, it dawned on me: Did I really want to be locked into something for that long of a time, no matter how big the paycheck? There was a certain level of freedom that I felt that I was giving up, even with such a large check dangling in front of my face.
What I Did Know
I did know, however, the arrangement I was in was not where I wanted to be. The bank that had bought out my small regional firm was not the company I had started with six years prior, and I knew that I needed to make a change.
Luckily, there were some other advisors in our office who were considering going in a different direction, more the independent route. I quickly jumped into their search of finding a new brokerage firm to call home. Seven months later, we left, and the rest is history.
It’s been over five years since that incident took place where, one day, I thought I was walking away with a check close to $200,000, to not getting the check and then also leaving my firm and starting my own financial planning practice.
Being able to reflect, I’m so thankful that I didn’t let greed consume me.
I’m now in a much better place, having the freedom to do what I want with my practice and my online properties and, indeed, be the free-spirited entrepreneur that I craved. Cashing in that $198,000 check would have been imprisonment. I would have been stuck.
What hasn’t even been mentioned in this whole discussion was what happened to Merrill after that. Remember, this was Merrill in their prime, not after they fell from grace and had to merge with Bank of America.
All that potential bonus money never would have come to fruition. Disaster averted.
Can you think of a time that you compromised who you were in order to get ahead?