In the past several months, some of the major firms have pulled back on the amount of recruiting they’re doing, and recruiting deals have taken a big hit. While the majority of the rhetoric discusses the potential impact of these lower recruiting packages on the advisors considering a move, the bigger impact may ultimately be on the wirehouse advisors who choose to stay put. That is, those who are taking a “wait and see” approach, hoping that their firms’ plans to recruit less will actually benefit them more.
Hope May Not Be the Best Strategy
Advisors at every major brokerage tell us that they feel frustrated by a bank-owned culture that is rife with bureaucracy and inefficiency. That’s been true for some time, but what’s newer and more prevalent now is the sense that these advisors are being “marginalized.” The advisors are feeling that their firms are looking for more ways to tie them up and take away their autonomy. Consider these five points:
- The less competition there is for advisors, the more power that rests with the firms. It seems to us that recruiting keeps the firms honest. They have to work hard to lure top talent away from their competitors and continue to invest in their wealth management units to remain relevant and at the top of the food chain.
- It raises the question in every advisor’s mind about protocol. Will their firms continue to be signatories of this game-changing manifesto that essentially made it possible for advisors to change firms with impunity? If firms are not recruiting as much, then protocol may be less necessary to them. Could the firms wind up saying, “We have more to lose by attrition and less to gain by recruiting, so are we better off not being part of protocol?”
- By saying that the only advisors they are interested in recruiting are the “franchise players,” the message is pretty clear. That is, if you are an advisor doing anything less than $2 million in annual revenue in a major market and $1 million in a smaller city, you are not that valuable to your firm. And how much support can you expect to get if you are not considered a “golden child”?
- Many teams want to recruit next-gen talent. Most often, that talent is not homegrown nor the franchise player, but rather a $300,000 to $1 million producer, who currently may not fall under the firm’s selective recruiting criteria. This could ultimately impact the ability for teams of all sizes to grow.
- There is less incentive for the firms to continue the aggressive retiring-advisor sunset programs. If the price of recruiting has come way down and there is less competition for most of the advisor population, then what reason do the big firms have to keep the advisor-friendly sunset programs at high-water marks?
While it feels like things just shifted from a seller’s to a buyer’s market, the reality is that the waterfall of legitimate possibilities for advisors of all sizes has expanded exponentially. There are still outlier deals from very interesting and real industry players, and if you are a corner-office advisor who wants to join Morgan, Wells Fargo, Merrill or UBS, the door is still open for you. And certainly, independence will continue to be a landing spot for much of the advisor population at large—particularly those who've grown tired of the ever-increasing bureaucracy of the wirehouse world.
There’s no doubt that these changes relative to wirehouse recruiting can feel unsettling, but firms are committing to do more to support their existing advisor force. So staying put to see how this plays out makes perfect sense—provided you are doing so based on a plan that is strategic, not rooted solely in hope or fear. Any decision you make—whether to stay or go—should be made based on real knowledge of the industry landscape, thorough due diligence, and a vision of what is best for your clients and your own career goals.