Large independent broker-dealers continue to make headway with recruits

DOL fiduciary rule is having some impact, but advisers are still moving within the industry

May 1, 2017 @ 2:41 pm

By Bruce Kelly

After a strong recruiting year in 2016, large broker-dealers continued to ring up recruiting gains in the first quarter.

For example, Ameriprise Financial Inc. said that close to 100 veteran advisers moved their practices to the firm in the first quarter, compared to 77 in the prior quarter.

Commonwealth Financial Network continued to attract advisers, snagging advisers producing about $15 million in total revenue — known as gross dealer concession in the industry — for the second consecutive quarter, according to a senior executive at the firm.

And LPL Financial Holdings Inc. said that it added 95 advisers in the quarter, but those gains were tallied only after excluding the previously discussed large departures of advisers — 118 — related to institutional clients and client separations. With a net loss of 23 advisers in the quarter, LPL's newest total of advisers now numbers 14,354.

There is no doubt the landscape for recruiting brokers has changed in the past 12 months. The large wirehouses have pulled back on their largest recruiting packages because of the DOL fiduciary rule that prohibits tying compensation to sales incentives. And independent firms are focusing much more on the profitability of advisers they recruit, not just assets under management.

At the start of the year, brokerage executives were mixed in their assessment of how recruiting would kick off in 2017, particularly because of the DOL rule, which has been delayed at least until June.

Were advisers thinking about moving to larger, more established independent broker-dealers because of their resources to to adapt to the new DOL rule? Or would they simply stay put and delay moving until there is more clarity about the rule?

Both theories remain prevalent, said Jonathan Henschen, an industry recruiter.

"One reason I see reps changing firms is because, with the DOL, their broker-dealers are not allowing commission products in qualified accounts, retirement accounts," he said. "They want to move now because of changes at the broker-dealer due to the DOL."

"Others are complaining about changes at their B-D, like increased costs for advisory administrative fees or mark ups on third-party money managers with fewer managers on the platform," Mr. Henschen said. "But I've also seen quite a few reps who are in limbo because of the DOL. They have a wait-and- see mentality."

Regardless, large firms continued to gain traction with recruiting over the first quarter.

"I'm proud that Ameriprise has become a top destination for advisers who are looking to grow and adapt in a dynamic environment," said Ameriprise Financial CEO James Cracchiolo on a conference call with analysts on April 25 to discuss first-quarter earnings. "And the productivity of our more recent hires is about 20% higher than advisers recruited a year ago, and our pipeline looks good."

"On the recruiting front, we continue to see good adviser movement across what I would call the independent and employee-based channels we typically recruit from, so that's encouraging," said Matt Audette, LPL's chief financial officer.

"The DOL is more a point of curiosity," said Andrew Daniels, managing principal of business development at Commonwealth. "It's not at the forefront of what's driving people to move to Commonwealth. Advisers are moving to find a better platform to support their business."

"The advisers we have always attracted are not significantly affected by the changes coming with the DOL rule," Mr. Daniels added. "They are already doing largely advisory-based business, the adviser as portfolio manager, for example."

Despite success to start the year, there's no crystal ball when it comes to attracting new advisers to a firm, he noted. "I feel good about the rest of the year in recruiting, but who knows?"

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

May 30

Conference

Adviser Compensation & Staffing Workshop

The InvestmentNews Research team will present exclusive data and highlights from its bellwether benchmarking study that will identify best practices for setting and structuring compensation and benefits packages throughout your... Learn more

Featured video

INTV

Surprises when reporting on Morningstar

Assistant managing editor Susan Kelly speaks with senior columnist John Waggoner about the interesting discoveries he found in speaking with the analytics giant.

Latest news & opinion

Morningstar evolving well beyond its origins analyzing mutual funds

Led by CEO Kunal Kapoor, firm is moving way past ratings — and financial advisers are paying close attention.

Focus Financial IPO could be a sell signal for RIAs

The $100 million stock offering will fine-tune RIA valuations.

Ex-Edward Jones broker sues former firm, alleging racial bias

Complaint alleges the firm's policies limit African-Americans' 'income and advancement opportunities'

Piwowar defends SEC's best-interest rule

SEC commissioner says the Department of Labor rule set up an 'unworkable, impossible set of standards for people to comply with.'

RIA in a Box acquired by private equity firm Aquiline Capital

New owners plan more growth for the software service provider.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print