RIA Recruiters' Notebook

RIA Recruiters' Notebook

Three RIA custodians talk about who they're recruiting and how they're attracting recruits.

Growth in the RIA channel is booming. With that in mind, here are comments from representatives of three powerhouse custodians about who they're recruiting and how they're differentiating themselves.

Scott W. Dell'Orfano, executive vice president, sales, Fidelity Institutional Wealth Services

A focus on breakaways

We continue to see an increase year-over-year in wirehouse teams and in the size of their books. We recruited 13 breakaway teams that manage more than $250 million in 2010.

When you think about any of the wirehouses with thousands of registered reps — for them to lose a couple hundred might not be that significant. But it's pretty significant client acquisition for any custodian.

Part of our focus on breakaways involves helping advisors choose the right model. There's no one right answer for everyone. We make sure we ask a lot of questions at the front end to drive them to the solution that's best.

Trends in model preference

It's evolved. This year over half of our breakaway brokers have joined an existing firm. Three years ago, most of the folks that were looking to leave and contacting independent custodians were asking questions about establishing their own firm.

But there are more options now with the emergence of new business models. For example, there are strategic acquirers like HighTower. We work closely with firms like that. It's a joint sale from the beginning. Once we identify that the wirehouse breakaway team is potentially a good fit for what HighTower offers, we bring them into the sale.

Upgrading clearing services

There's been significant growth in the hybrid space. Most of the teams we see do commissionable and fee business. Historically, the two businesses operated independently here. For the past 18 months, we've been working on offering an all-encompassing solution where technology, services and onboarding are integrated, where the two platforms are integrated. For example, if you're fee and commission-based, you can call our service staff for help with either one. It means training our staff in both businesses, so they can focus on dually registered advisors.

Thomas Nally, managing director, institutional sales, TD Ameritrade Institutional

Recruiting results

We're having a fantastic year for the first three quarters of our fiscal year. In 2010 we ended with about a 40 percent increase over 2009 — a record — and we're about 20 percent ahead of where we were at the same time last year. Our pipeline is as full as it's ever been.

Breakaways vs. independents

We've already attracted 260 breakaway brokers and we're on track for another record year. We're seeing brokers be very proactive ahead of all this uncertainty, whether it's because of issues going on within their own organization or regulatory concerns.

While we see wirehouse breakaways, we also see a lot of advisors from independent broker/dealers on the path to complete independence from the commission-based model.

One of the fastest-growing channels in the RIA space right now is the hybrid, and we bring on many hybrid advisors who utilize one of our broker/dealers that we work with. Also, we are seeing high levels of folks break away but joining an existing firm- — about 30 percent of brokers.

Attracting reps

What ultimately attracts a lot of advisors is our conflict-free platform. Another thing is our technology — the innovative technology we've rolled out over the last several years that has been widely recognized as cutting edge, things like open access, integration with a lot of the platforms advisors utilize on their desktop every day. And we spend a lot of time working with advisors to grow and improve their business. In the last several years, we've done over 7,500 individual consulting engagements with advisors, and we see that their growth is double that of other advisors.

We go through a different process for breakaways and other advisors. I think a lot of wirehouse brokers have the perception that once they leave the wirehouse they're on their own. It's a bit more of an educational process for them.

The RIA business right now is the fastest growing segment of the wealth management industry. The demographics are in our favor. And we're trying to look at different segments of the market, including how we can help college kids embrace the RIA model.

Tim Oden, senior managing director of business development, Schwab Advisor Services

Growth from wirehouse advisors

We ended the first half of the year at about an 8 percent year-over-year improvement in terms of the number of teams joining Charles Schwab. If you break that down further, wirehouse teams were up 15 percent during that timeframe. So the reality is that the larger percentage of growth in the number of teams is coming from wirehouse advisors. When we look at the second half of the year, the third quarter is looking to be stronger and the fourth quarter even stronger. The third quarter also has had some fairly large books of business converting from the wirehouse channel.

We're hearing that advisors are spending far too much of their time explaining what's going on with their firm, instead of managing client needs.

A change in the message

Our outreach process hasn't changed dramatically. What's changed is some of the messages we're using — more around stability, the security of a custodian the size of Charles Schwab. That now isn't the time to be taking on risks by moving to a smaller custodian.

How we cater to an existing independent looks very different from the story we convey to the wirehouse rep, because their concerns are vastly different. For existing independents, it has to be much more around our value-added services, like our consulting. The message we deliver to the wirehouse environment is very much around control. We have to make sure that reps understand making the move won't lower their standard of living.

Transition and business consulting services

We have business development teams that work with anyone looking to move. When we're talking about the larger, more complex books of business, we've got very sophisticated, specialized resources to assist with that transition. But regardless of the size of the book of business, we have a suite of services we make available.

We've been ramping up our business consulting arm over the last 12 months. That's really where we try to differentiate our services on an ongoing basis — we don't just transition assets. We help you understand how to run a successful enterprise. Our business consulting arm has been growing very rapidly, to be able to put more consultants in the field.

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