It’s an annual ritual for our firm: We gather the team together and take a long, hard look at what transpired over the previous 12 months. Working together, we examine deals both large and small, dissect the headlines, hearsay and study the players—all resulting in an annual report that we make available to professionals in the wealth management industry.
This year, unlike the previous, a consensus formed on an overriding theme: control. It’s what has motivated both firms and advisors to rethink their courses. It was and continues to be the impetus behind the creation of so many new models that continue to grow and thrive. And it’s feeding the disruption in our industry—prompting both turmoil and innovation.
Control is driving the virtual “tug of war” between advisors. Advisors want more of it, but the firms they work for, or are affiliated with, want to give them less. It’s this battle that has driven the lion’s share of advisor frustration and, in many cases, movement.
Advisors of all sizes and from across channels want to control their own destiny and have the ultimate say in how best to service their clients.
As the big firms manage more to the lowest common denominator, threaten to move to a salary/bonus compensation plan and focus more on the bottom line, advisors are feeling increasingly marginalized. As such, the breakaway broker trend that started as a mere trickle a decade ago continues to expand and accelerate.
In the independent broker/dealer channel, limitations placed on independent reps and the lack of scale and robust resources at some of the smaller b/ds is causing advisors to jump to another firm or to the registered investment advisor/RIA hybrid space, where they have ultimate control. In fact, those that trade employee status for independence do so most often because they want maximum control over every aspect of their business.
Perhaps the most significant example of brokerage firms attempting to wrestle more control from their advisor force is Morgan Stanley and UBS pulling out of the Protocol for Broker Recruiting. While at first, the industry thought the 14-year-old agreement would collapse and wirehouse advisors would stay trapped in their seats, however, the past several months have proven that with the right legal support advisors can still move with impunity. Abandoning protocol, at its core, creates the suggestion that the advisor doesn’t own his client relationships—a notion that has driven even more advisor movement, often away from the brokerage world altogether.
And there has been a significant reduction in wirehouse recruiting deals, leveling the playing field between their offers and all others. This has served to drive advisors to choose the firm or model they want based not on the highest bid, but on where they believe they will best control the client experience and how they grow their businesses.
Recognizing that there’s this ongoing struggle for control can, at the very least, give advisors the opportunity to arm themselves with knowledge. And with that knowledge, an advisor can operate from a position of strength—even when it can sometimes feel like he or she might be losing the battle.