BROKER DEALER
go on vacation with their families, and certain parts of the country are just so beautiful that no one is really thinking about making a change at that exact moment,” she says.“ But I think what’ s driving people now is they expect more from their firms.”
There was a time, she says, when advisors looked at the firm they affiliated with and saw it simply as a platform. But now they believe they should be getting more— more technology, more support and more of the opportunities that go along with their affiliations. And if those expectations are not being met for whatever reason, those advisors have other places to explore.
John Amore, president of Austin, Texas-headquartered Kestra Financial, says consolidation among the big industry firms has further changed the landscape for those advisors seeking greener pastures, since there are fewer companies to choose from. But even if the number of companies has been winnowed down, advisors might actually have more options in service and back-office help. Those advisors who are switching B-Ds are looking for deeper strategic support, he says— not just a platform but a true partner.
“ Advisors aren’ t just asking,‘ What can I earn?’ They’ re asking,‘ Where can I build?’”
Regardless of the motivation for a move, sources agree that in this competitive recruiting environment it’ s the advisors themselves who are calling the shots.
“ One hundred percent, it’ s the advisors who are in control,” says recruiter Jodie Papike, CEO and managing partner of Encinitas, Calif.-based Cross-Search, which focuses on advisors in the independent broker-dealer space.“ This is absolutely an environment where quality advisors are being courted like I’ ve never seen before. Firms are spending an incredible amount of capital to attract them.”
terest rates they’ re earning on client cash.( Remember the cash-sweep lawsuits of last summer?) The other is the cash infusions that have come from private equity backers.
That extra capital is financing a talent war among the big firms, and one of their strategies is to expand the affiliation models they offer advisors— especially by offering more fee-based business opportunities through RIA affiliations( as opposed to commission-based broker-dealer models).
The competition has“ really forced a lot of traditional IBDs to offer multiple ways that you can affiliate with them,” Papike says.“ So a lot of those types of firms, including an LPL or a Commonwealth, look just as much like an RIA-focused
firm as they do a broker-dealer, even to the point that a lot of advisors are joining firms like that and not even joining the broker-dealer, only joining the RIA.”
But once advisors have zeroed in on the affiliation model they want, there’ s the next enticement: money.
“ All advisors will tell us that they don’ t care about the money— that they’ re not going to make a move for money,” says Rick Rummage, founder and CEO of the Rummage Group in Herndon, Va.“ But they tend to pick the firm with the biggest check. Most of them.”
Rummage sometimes thinks firms couldn’ t get any more aggressive, but then concedes that every year they do—
Firms Stretch To Attract Recruits
Recruitment capital has been flowing from two main sources: One is the money broker-dealers have juiced from the inwhether it’ s through the level of transition assistance they’ re offering up front or the intensity with which they push their recruitment teams.
“ And right now the recruiting wars are as aggressive as they’ ve ever been,” he says.
And the LPL-Commonwealth deal has had a ripple effect in the talent wars that goes beyond those two firms and has spread throughout the industry, says Louis Diamond, CEO of recruiting firm Diamond Consultants in Morristown, N. J.
“ Every firm that is competitive with LPL dramatically increased their recruiting deal to capture the Commonwealth advisors specifically,” Diamond says.“ But what I’ m seeing is advisors who aren’ t
from Commonwealth are looking around at this point in time, and they’ re benefiting from the tailwinds of that Commonwealth deal, [ too ].”
That spike in transition incentive has come atop the escalations already seen over the last few years, sources say: Upfront transition assistance five years ago was 25 % to 40 % of trailing-12-months gross-dealer concession, but that’ s risen to 80 % to 90 % … even to 125 %.
In mid-June, Cetera famously wrote an open letter to Commonwealth advisors offering 150 basis points of transition assistance. Payout structures offered by firms like LPL, Cetera and Osaic typically use basis points on assets, while other firms
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