Not only is the investing public clamoring for financial advice, but broker/dealers (and registered investment advisories) are searching for advisor talent as never before. In fact, advisory firms are competing for talent even more than they are competing for clients, according to a recent survey by Moss Adams, a financial services consultancy in Seattle.
There are a couple of reasons for this talent squeeze. First, there is a demographic phenomenon known as the baby boomers (you may have heard of them). They are beginning to retire, and because planning income distribution is more difficult than buying the latest hot mutual fund, they need your advice. Then there is the death of the defined-benefit pension plan, and the migration to defined contribution plans, which have forced retirement planning on the individual. That story has been well told in these pages and elsewhere.
But what gets lost in the story is the fact that there aren't enough good advisors to fill the need for good advice. In the early part of this decade, training programs were starved and ignored; now it's time to refresh the stock. But that will take time. Most rookies need four or five years on the job before they become full-blown, experienced advisors themselves, according to Moss Adams data. (After all, the job is only getting harder as wealth management gets more complex.)
In the meantime, that leaves a veritable feeding frenzy for talented financial advisors — people like you. On average, independent b/ds and RIAs will add 14 percent more financial advisors in 2007, according to Moss Adams. “Not surprisingly, the need for new talent is rapidly raising compensation levels as well as overall costs,” says Moss Adams in its most recent compensation survey.
Here's the wrinkle: Competition for top advisors — those financial advisors with “affluent” clients and recurring revenues — is forcing wirehouses to pay top dollar (up to 200 percent of trailing 12 months' production). And you won't get that if you go independent (where cash payouts are at 20 percent of trailing 12, if that.) But then the rep who goes independent isn't in it for just the check. As one friend of this magazine put it, “If you want a bonus, you'll go to another wirehouse. It's just like, if you want foie gras, you shouldn't be eating at McDonalds.” Wait. That didn't come out right. Put another way: If you want to own your own business, are entrepreneurially minded, and want to hire people and build processes, then going independent is for you.