To attract advisers, broker-dealers need to find a value proposition that stands out

Small firms look to flexibility, succession planning and culture as key differentiators in recruiting.

Jan 13, 2014 @ 12:01 am

By Mason Braswell

From wirehouses to RIAs to RIAs affiliated with a wirehouse and everything in between, the types of firms and business models in the industry are multiplying even as the number of financial advisers continues to shrink.

As advisers have more options than ever in terms of how to affiliate, the pressure is on for small and midsize broker-dealers to distinguish themselves. Without the large recruiting bonuses or slickest technology platforms, competing in the marketplace requires smaller firms to come up with a simple value proposition that stands out, Jodie Papike, executive vice president of recruitment firm Cross-Search, said during an InvestmentNews webcast Jan 7.

“Successful firms have really developed what their niche or value position is and they've figure out how to attract that kind of adviser,” she said. “They have a recruiter in place who has figured out how to communicate the value proposition to the appropriate marketplace in a way that it gets people's attention, and it is different than what everyone else is doing.”

The problem is finding a one-size-fits-all solution. Advisers are faced with so many options when going independent that giving them only one way to affiliate is no longer attractive and may turn off top teams who want more choice or ownership over their practice.

“There are so many question marks and so many gray areas when it comes to whether someone is going to develop an RIA, and stay with the broker-dealer and be a true hybrid, or break away completely, or use the broker-dealer's corporate RIA,” Ms. Papike said. “Firms are figuring out that if they can come up with a solution and be flexible, they're going to attract more advisers.”

As a result, giving advisers more choice with a hybrid model has been a boon for smaller broker-dealers. The adviser may not affiliate in the way that is the most profitable for the firm, but it is a sacrifice that the best firms are making to recruit and retain top talent.

Firms are also focused on developing a kind of niche specialty in other hot-button areas such as succession planning. Earlier this year, for example, a group of former Morgan Stanley advisers banded together to create a firm called Steward Partners that seeks to attract veteran teams looking for a different way to sell their book of business and make a safe exit.

“Firms are going outside the box and developing platforms attractive to advisers above and beyond service and technology, and they are getting attention enough to have advisers come to them,” Ms. Papike said.

The other selling point when recruiting advisers is the culture of the firm, said Cecile Munoz, president of U.S. Executive Search and Consulting. Leaders have to be very clear and go beyond marketing slogans to be able to communicate the strengths of the firm, and what tools and resources will be available to the adviser.

“The leading executives at the firm have to be very clear beyond their PowerPoint or mission statement about what culture exists at this particular firm,” Ms. Munoz said. “To me, the culture is a representation of what they aspire to do very, very well.”

One point that has been especially important for smaller firms is having a clean regulatory record and demonstrating that leadership is focused on transparency with the consumer and regulators, Ms. Munoz said.

“Advisers are much savvier [since the financial crisis],” she explained. “They are very aware that what happens to the organization has an effect on the personal brand.”

The rising pressures facing broker-dealers are stressful for firm leaders, but that makes it a good time to be an adviser looking to make a move, said Tom Daley, founder and chief executive of The Advisor Center.

“It's really an exciting time for a financial adviser today because they're able to benefit from the development of these local opportunities,” he said. “That will give the adviser scale, it will provide them with infrastructure and it will also provide great succession opportunities.”

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