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RBC Wealth Management US

RBC, Others To Capitalize On Merrill’s Aversion To Big Recruitment Bonuses

Merrill’s shift in strategy was serendipitous for smaller brokerages planning on growing in 2017.

Merrill Lynch’s decision to temporarily cease offering large recruitment signing bonuses was serendipitous news to smaller brokerages, as a number of them planned to do just the opposite this year.

Like the Bank of America-owned broker/dealer, some smaller brokerages are investing in training programs for both rookie and experienced advisors. Still, they aren’t dialing back spending on recruitment and outsized bonuses in tandem with investments in training. They are as interested as ever in attracting top-producing advisors to grow their businesses and still willing to pay.

One brokerage in particular is standing out, according to Louis Diamond, the vice president of financial advisor recruiting firm Diamond Consultants. This year, the number advisors recruited by RBC Wealth Management U.S. has been “far above” the rest, Diamond said.

Historically, Diamond said the regional brokerage (which is somewhat of a misnomer, given its size and geographic reach across the continental U.S.) has been more active in recruiting experienced brokers and offering them larger bonuses than other firms outside of the four wirehouses. The wealth manager’s recent efforts are an expansion of that.

Tom Sagissor, president of RBC Wealth Management U.S., said the hiring of new and experienced advisors will reach a record level at the firm this year and he's proud of that.

“When we started the year in 2017, we did so with a focus on investing in our business to create growth opportunities,” he said. Among other investments made this year, such as those in technology and new leadership positions, that meant growing the advisor network.

Sagissor did not share how much money the unit was spending or what percentage of the investment in recruitment was being dedicated to new advisors versus recruiting experienced ones. He said the allocation to each differs annually. Some years it’s split evenly. Other years as much as 80 percent of recruitment dollars are spent on attracting experienced advisors, he said.

Given it is only May, it’s hard to predict what the breakdown will be in 2017. However, Sagissor made it clear that RBC’s strategy and budgets for this fiscal year were discussed roughly nine months ago — well before talk of recruitment bonus compression began swirling and it was reported that Merrill Lynch had decided to stop paying big bonuses starting June 1.

To spur its recruitment success, RBC needed to make significant investments and that decision was not made based on speculations of competitors’ strategies, Sagissor said.

RBC will nonetheless benefit from Merrill’s decision to temporarily stop paying large recruitment bonuses. One of the industry’s biggest players in the recruitment of top-producing brokers (typically those with production of $5 million or more) is now on the bench. Their absence could also put additional downward pressure on the size of recruitment bonuses.

RBC Wealth Management U.S. reported having more than 1,800 financial advisors in both its 2015 and 2016 annual reports. It did not report the number of advisors it had after the first quarter of 2017. Assets under management of the wealth management unit (which includes City National Bank) have steadily grown from $272 billion in 2015 to more than $303 billion at the end of the first quarter of 2017.

Along with RBC, Diamond thinks that Morgan Stanley, Wells Fargo and other brokerages see Merrill’s decision “as an opportunity.” So do other smaller brokerages.

Kimberly Thekan, the managing director of advisor talent strategies for Baird’s Private Wealth Management business, said the unit has been investing in and making changes to training programs while hiring experienced advisors is “full steam ahead.”

“We have no intention of scaling back ... and are not planning on making changes to our recruitment strategy,” Thekan said.

The wealth management arm of the financial services firm has about 880 advisors across 29 states who oversee approximately $117 billion in client assets.

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