Whether you agree with him or not, Chip Roame, managing principal of Tiburon Strategic Advisors, is not afraid to tell you exactly how he sees it when it comes to the financial services industry. It was no different at this week’s Tiburon CEO Summit in New York. During his opening presentation Monday morning, Roame said of the 12 percent of wirehouse advisors that are changing firms in any given year, about 80 percent of them are fired.
“You can call that guy a breakaway broker if you want to,” Roame said. “I would call that guy a ‘broken-away broker.’”
Two-thirds of the breakaway brokers who leave on their own land at another wirehouse or regional because they get a big check, Roame said. Recruiting packages at the wirehouses can be as high as 350 percent of an advisor’s trailing 12-month production, he added.
The other one-third of advisors are going independent. But the wires are not naïve about the fact that they’re losing advisors. According to Tiburon data, the four wirehouses (UBS, Wells Fargo Advisors, Morgan Stanley Smith Barney, and Merrill Lynch) have shed almost 8,000 advisors over the past three years. That’s 13 percent of their sales forces.
In another one of Roame’s bold predictions, he said one wirehouse will launch a half-way house sometime this year, creating a model where the firm is partly independent and partly captive. One example of this is Wells Fargo Advisors Financial Network (FiNet). (Roame’s other bold prediction made at the conference was that the number of discount brokerage branches and the number of bank branches will reverse themselves in the next 10 years.)
“They can retain their advisors if they want to, just by bribing them more, or they can create these half-way houses.”
If they choose to do neither, then their advisors are leaving because they’re being let go, Roame believes.
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(Read more from Staff Writer, Diana Britton on her blog, Yield of Dreams.)