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Edit Letter, Broker Ambivalence?

We've been polling wirehouse financial advisors about how satisfied they are with their firms for 19 years now. And, this year, I was struck by how ambivalent FAs at the big firms are. On the one hand, FAs at the remaining big five national brands say their overall work experience (based on 16 factors, from compensation to compliance) rates at about a C — or lower. Edward Jones, where reps once again awarded their firm an A, or 9.4 out of a possible 10, is the exception, with an amazing 43 percent of those queried completing the survey. UBS Wealth Management Americas and Wells Fargo Advisors reps gave their firms a grade of F.

But on the other hand, many reps at these somewhat tarnished institutions (again, except for Ed Jones) say their firms are the best to work for. Really. I won't get into details (you can turn to page 48), but I don't get it. They complain, but, according to our survey, many say they're not going anywhere. Golden handcuffs? What? I am not sure I understand how you can rank your firm as basically just “okay,'' and not search for something more akin to “excellent.”

Anyway, we've been carefully watching advisor movement this year, figuring that after the embarrassing and catastrophic events of 2008, the floodgates would open and wirehouse FAs would decamp to higher ground (to RIAs or independent firms, which, for the most part, avoided missteps such as auction rate securities, mortgage-based derivatives and illegal tax strategies). There actually has been a lot of moving around in 2009. Discovery Database, a company that tracks advisor movement, says that so far in 2009 (that is, from January through October), 4,122 reps left the wirehouse channel to move to another b/d channel (i.e. independent b/d or bank). That compares to 2008, when only 910 reps left the wirehouse channel to join another b/d channel. It should be pointed out that the 2008 stats measured only the five months from August to December, as Discovery only started keeping such stats in August of 2008.

Despite the incomplete data, you can see that the housing/credit debacle really did smash the ties that bind (deferred comp plans, which often held company stock), allowing FAs the freedom — and incentive — to move. Of course, the wirehouse firms are playing rough, offering big money to some recruits. In fact, the whales (big producers with the right kind of book) have been getting crazy deals (routinely grabbing 200-percent-plus of trailing 12 production as long as growth goals are hit). But the wirehouses have also been cleaning house, forcing out smaller producers (those generating $300,000 or less). According to Discovery, wirehouses shed 12 percent of their FAs year-to-date through October, due to both voluntary departures and firings: In January there were 97,000 wirehouse reps, in October, there were 85,000.

RIA platforms (Schwab, Fidelity Institutional Wealth Services, TD Ameritrade Institutional, etc.) say their pipelines are full. Indeed, Discovery says 1,702 advisors have so far been “flagged as breakaway brokers in 2009 — mostly small, but, as a TD Ameritrade executive told us recently, “There are some whales in there too.”

We thank you for your support. Drop us a line with your comments: 249 W. 17th St., New York, N.Y. 10011-5300. Or email us: [email protected]. Publisher Rich Santos can be reached at [email protected].

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