ThinkAdvisor: What are the biggest trends affecting
LOUIS DIAMOND One trend we’ve seen is that firms withmultiple affiliation models have become incredibly appealingto advisors.
This is because as advisors’ practices evolve in size andcomplexity, either as generations retire out or someonewants more control and freedom, they have the ability togo independent or change the amount of support they’regetting without having to transition away from theirorganization.
MINDY DIAMOND Also what’s really changed in theindustry is that the advisor mindset has shifted, meaning what advisors value today is very different than whatit once was. When I started the business almost 25 yearsago, the top questions on most advisors’ minds at a broker-dealer were: What are the deals? What kind of deal is beingoffered by another firm or another model to advisors whojoin them?
Everyone wants to understand the economics, since theeconomics of a transition need to make sense. But the mostimportant driving factor in advisor movement today is advisors wanting freedom, flexibility and control. Also, this isdriving the way the industry has evolved — and newer modelsare being born.
The big firms are losing a lot of advisors, who can’tget what they want where they are. People are moving tothe right side of the industry continuum, where newermodels have been born to solve for exactly what advisorswant: Models that give advisors more freedom, flexibilityand control.
What other thoughts do you have about the new models?LOUIS We look at our data and find that when wirehouseadvisors move these days, many are moving to alternativemodels rather than to another wirehouse. We’re still seeinga decent amount of movement from wirehouse to wirehouse, and it’s picking back up from a low point of a coupleof years ago.
But increasingly advisors are finding success and that theyreally resonate at boutique firms like Rockefeller CapitalManagement, First Republic Bank and even JPMorgan. Someof the “super-regionals,” like Raymond James or RBC, thosetypes of firms seem to be resonating, too — ones that aresmaller and more advisor friendly. They have cultures thatadvisors really like, and that gives advisors a sense of freedomand control that maybe they didn’t have at their old firm.
MINDY We’re talking about the models that advisors viewas the best of both worlds. On the one hand, they can go independent and build their own firm with maximum freedom andcontrol there. But they also have to go through the headacheof building a firm.
While plenty of advisors are entrepreneurial and want todo just that, there’s a large swath of the advisor populationthat wants more independence, more control and more freedom than they have at Merrill Lynch, Morgan Stanley or UBS,but going independent is a bridge too far. The models of thefirms that Louis just mentioned — the Rockefellers, the FirstRepublics, the super-regional firms, boutique firms, etc. —provide them with the best of both worlds, a turnkey firm allunder one roof with fully built infrastructure along with theadditional freedom and control they could get if they werecompletely independent.
It’s not easy to keep up with the rapidly changing panorama of financial services firms. As larger entities gobble up smaller ones, which are grappling with numerous challenges, the total number of broker-dealers registered with the Financial Industry Regulatory Authority continues to drop. It now stands at about 3,500and is declining by about 100 per year.
The total number of registered representatives stands at about 624,500. About half of these professionalsare registered with broker-dealers only, while others are dually registered (as registered reps and investmentadvisor representatives).
Many advisors are choosing to work under the umbrella of a registered investment advisor, and the numberof RIAs is on the rise. It’s now at 13,500 and has been growing by about 400–500 firms a year, according to theInvestment Adviser Association and National Regulatory Services.
To make sense of these significant industry trends and what they mean for financial advisors, we spoke withLouis and Mindy Diamond of Diamond Consultants. Mindy founded the recruiting firm Diamond Consultants in1998 and serves as its CEO. Louis, her son, was tapped as its president earlier this year and has been with the firmsince 2016, after working in financial services for seven years. (One of their colleagues is Chief Operating Officerand General Counsel Howard Diamond, Mindy’s husband and Louis’ father.)