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Edit Letter: The Independent Life, Again

The migration of financial advisors to independent firms used to be mostly talk. But in the past year, has begun to gather some momentum.

Recently, I have been getting phone calls from wirehouse advisors interested in going independent. Some want an opinion or some just want help in locating an article about the pros and cons of leaving a national brand to an independent broker/dealer that their clients might never have heard of. Some just want to talk.

In late October, I got an email from a wirehouse advisor asking, “Have you become a shill for IBDs and registered investment advisors?” He noticed that this year we have had more coverage of the “independent life,” of RIAs, and we've run more trend stories about the movement of financial advisors. “No,” I assured him, “we are not shills for anybody.” But we are very interested in FA movement in 2009. Remember that the move to independence and to RIAs has been described over the years as a trend that is about to go wild. In fact, the movement of FAs out of wirehouses to IBDs and RIAs was better described as a trickle — around 1 percent or so moved to IBDs and RIAs every year.

This year, we were curious: Would that steady trickle now spike, since Wall Street blew itself up and embarrassed the retail financial advisors who work for the big, national brands? So, yes, we've been watching and writing about the trend a lot this year. And, yes, 2009 is notable for the increase in advisor movement. But it isn't always what you would think. We are surprised by the number of FAs who switch from one wirehouse to another. (Of course, the destruction of the ties that bind, i.e. deferred comp plans with company stock, and the large up-front forgivable loans made such movement less surprising, I suppose.)

Our friends at Discovery Database, the group that tracks financial advisors by searching SEC, FINRA and other databases, says that rep movement (from one b/d to another or to RIAs) was “strong” in 2009, with, on average, 2,140 reps moving per month. Here are some facts from Discovery, which justifies our continued interest in the phenomenon:

  • Over the past year, 25,109 reps have moved from one firm to another.
  • Of those changing firms, 40 percent were wirehouse reps. Furthermore, only 53 percent of wirehouse reps who switched stayed within the wirehouse channel. The other 47 percent left the wirehouse channel.
  • In the first quarter of 2009, there was a 17.6 percent increase in rep movement from the last quarter of 2008.
  • There was a 24 percent decrease in rep movement from the first quarter to the second quarter of 2009, while rep movement remained the same from the second to third quarter of 2009 with less than a 1 percent decrease.

There you have it. FAs are restless. Oh, and, for more, see this month's special supplement, The Independent Life, after page 71. Yup, we're at it again.

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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