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2009, The Year of the Forgivable Loan. And 2010?

Recruiting deals soared again last year.

Registered Rep. has been writing about financial advisors moving from one firm to another so much that some have accused of us shilling for independents and RIAs. But you've got to admit: 2009 was the Year of the Upfront Bonus and Forgivable Loan. If you were the right kind of FA with the right kind of book, you could receive deals (with performance incentives) that would have made your broker father (supposing you had one) grasp his heart in envy.

The fact is, the recruiting deals have been getting so rich that we wonder if 2010 will see the end of the big “bonus.” In remarks to John Byrne, our long-time contributing editor, Bob McCann, now head of UBS Wealth Management Americas unit, said: “Here is what I am not interested in: Paying someone a lot of money and have them come in and effectively retire. I want people that want to go to work hard. … I think some firms have made a mistake in the last few years by frankly paying too much for advisors, giving them far too much guaranteed money.” McCann continued, “If you are going to come to a firm and there is a time and cost that comes with it, [then] I have no problem with a financial package that recognizes that transition. But if you pay too much, who wins? I think the advisor wins and sets the wrong dynamic. And quite often the firm loses and sometimes the client loses; I don't want to do that.”

Indeed, the deals got so expensive that Byrne reports, beginning on page 26, that wirehouses have put a renewed effort into recruiting rookies. He writes that training has always been vexingly difficult: In the past it was so hard to identify raw talent that, after attrition, it became too expensive (as much as $300,000 per trainee). So, firms began to poach each other's established producers. In a related story, please turn to page 24. The upshot: the number of wirehouse FAs switching b/ds has been slowing since June.

As far as predictions on the economy and markets go for 2010, I wouldn't want to have to make any — well, at least not put a wager on them. On page 52, Brad Zigler, another veteran contributing editor, details what has been coined “the New Normal” — an economy marked by high unemployment, slow-to-no growth and rising interest rates and rising inflation. No doubt you've been reading about it. But Brad also offers actual investment ideas in the event the New Normal prevails in 2010. Also in this issue, analysts at the Leuthold Group point out that the current bull market may be getting old, but, they note, that since the “modern era” (1957), bull markets tend to reach new all-time highs before crapping out. Leuthold, a group not known for their propensity for bullishness, is still bullish. Analysts there reckon that even if the S&P 500 doesn't reach a record high, we have perhaps another 20 percent to go (based on median normalized p/es) before topping out. Please turn to the Endpiece on page 80 for an excerpt from Leuthold research.

Happy New Year,

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