“ Some firms are really not shy about where they make their money . They make the most money off of advisors that are on platform with them . That ' s where they ' re most aggressive with up-front capital .”
— JODIE PAPIKE , CEO , CROSS-SEARCH
swollen about 25 % over where it was just two years ago — at least for some advisors . “ Some firms are really not shy about where they make their money . They make the most money off of advisors that are on platform with them ,” Papike says . “ That ' s where they ' re most aggressive with up-front capital .”
Meanwhile , what the advisor gets later after coming over will be a reflection of what assets they bring onto the platform ; the firm likely sets a target for the new advisor to hit , with bonuses at six months , or a year , or as far out as three years , she says . “ So if an advisor is really in growth mode , and they will be putting assets on platform , there can be a tremendous opportunity to get back-end bonuses that will compensate them for that growth ,” Papike says .
Robbins says she ’ s observed firms and advisors measure their value in one of two ways , either as a percentage of an annual GDC ( gross dealer concession ) or as a level of basis points on assets .
Either way , she says she ’ s seeing recruitment deals
in the marketplace of up to 100 %, meaning the advisor ’ s value is 100 % of their annual GDC marker or 100 % of their basis points on assets .
Stephen Caruso , an associate director at Boston-based Cerulli Associates who leads research on the RIA industry , says that advisors who are open to being lured out of their existing practice have to overcome significant challenges , which makes the up-front reward extremely important , considering how long it takes to transition clients after the advisors move . “ The challenge is how long it will take to grow their book back to where it is now if they exit ,” he says . “ Advisors are taking around 12 months to get their book back if they leave a firm .”
Recruiter and industry consultant Louis Diamond , of Diamond Consultants in Morristown , N . J ., agrees with both Papike and Robbins . “ Pre-Covid , an advisor getting 50 % of their GDC to move was pretty competitive . But now I ' d say , like the median bid for offer is probably like 75 %. And then at the larger broker-dealers that can easily be around 100 basis points or 100 % of GDC ,” he says . “ So the deals have almost doubled since the beginning of Covid .”
Manish Dave , a senior vice president at Ameriprise who leads the firm ’ s recruiting effort for experienced advisors , admits the competition for top talent is very stiff . “ If I thought about where deal levels are today versus where they were 10 years ago , it ' s been a dramatic shift ,” he says . “ The best advisors who own really quality businesses , they ' re always going to have choices . They ’ re going to have choices to stay where they ' re at , and if they do make a move , there ' ll be a lot of capital that will be in play to reward them for that .”
Private equity has entered both brokerage and RIA industries , but the lofty multiples some institutions are paying for RIA firms make the option of dropping one ’ s securities license and going fee-only even more lucrative . Over the last two decades , some of the biggest names in the B-D world , including Ron Carson of Carson Group and Ric Edelman of Edelman Financial Engines , chose that path , before selling their firms .
40 | FINANCIAL ADVISOR MAGAZINE | OCTOBER 2024 WWW . FA-MAG . COM