What’s a more recent issue or
trend affecting recruiting and
LOUIS Deals are at a high point,especially for top teams. There’snever been more competition forthe industry’s elite talent. Theheadline numbers that we’ve seeninclude the 300%-plus deals thathave been in place for the last fiveor six years.
But a big difference today is thatfirms are now putting more of thatdeal [money] upfront than ever.Many are reimbursing an advisor for all or a portion of theirunvested deferred compensation,which is really important to them.They’re making the goals in thedeals a bit easier to hit.
Overall, it’s a really good timeto be a seller or to be an advisor,because there’s more competitionfor their business than ever before.Firms that are serious aboutrecruiting have really had to stepup, both in terms of the deals ona percentage basis and with theirstructure in the value proposition.
MINDY As advisors look past the wirehouses or the traditional broker-dealer options and look at options likeRockefeller, Sanctuary Wealth Partners or other models ofquasi-independence, what’s on the table a lot of the time isequity. We’ve got an advisor [client] now that is with a wirehouse and is looking at a quasi-independent boutique firm.Fifty percent of the deal is being paid in cash, but the other50% is equity. Now that’s what’s really changed.
What does all this change mean for the big firms?
MINDY Are these big firms nimble enough to meet the advisors where they are? They are losing advisors because theirleaders are not paying close enough attention to what’s drivingmovement. Some of the things advisors want would mean easyand inexpensive fixes. Instead, the leaders allow complianceto run the firm, and often that means a much less entrepreneurial culture than advisors want.
It’s also a question of desire. If Merrill, Morgan Stanley and
UBS wanted to launch an independent arm, they’ve had plenty
of opportunity to do so. They’ve watched plenty of their top
advisors vote with their feet and
leave to go for a more independent
model over the last decade.
Their thinking is that it wouldcannibalize their private clientgroups and their employee-basedadvisors. The margins are razorthin in the independent space, andthey don’t really have a desire todo this.
They’re going to stick to theirknitting. They’ll continue to dowhat they do and do it well. Ifthey lose people along the way, inthe scheme of things, say 10 or soof their top advisors in a year, andthey’ve got 15,000 advisors — bytheir math, it’s a rounding error.
What’s your view of firmsthat give advisors broker-dealer and RIA options,such as Raymond James,Commonwealth Financial andLPL Financial?
LOUIS In the last year, thesefirms have introduced multiple new affiliation models, andthat is 100% motivated by thesechanging dynamics — advisorsare looking for different ways to affiliate with their organization than ever before.
In the case of LPL and its bid to capture much more top-end wirehouse teams, they started Strategic Wealth Services, amore supported, premium offering. They also started an independent employee unit called Linsco. They’re doubling downon their services as an RIA custodian.
Commonwealth started a supported version of independence geared to wirehouse advisors, as well. They also rolledout their RIA-only, or IAR-only model.
All of these different models — and there’s plenty of otherones that other firms have created — exist because these firmswere watching opportunities pass them by. Maybe they’velost advisors from their own firm who were looking to evolvetheir practices and couldn’t meet the need, or they lost dealsbecause they didn’t have these capabilities or this kind of levelof freedom as advisors were looking for.
MINDY The story behind this evolved industry landscape isthat most of the models and most of these newer firms were
All of these [new]
models … exist
because these firms
them by. Maybe
they’ve lost advisors
from their own firm
who were looking to
evolve their practice
and couldn’t meet the
need, or they lost deals
because they didn’t
have these capabilities
or this kind of level of
freedom as advisors
were looking for.