Escalating economic drama dampens appetite for adviser moves

This article is one in a series of midyear outlooks for 2022 by the InvestmentNews team.

Financial adviser recruitment and brokers hopping from firm to firm are creeping slowly but steadily back to levels last seen in 2019, the year before Covid-19 struck.

The pandemic halted businesses of all kinds, including the broad financial advice industry, for several months that year. Travel, a key to recruiting financial advisers, all but shut down that spring, forcing financial advisers and brokerage executives to adapt to meetings over platforms like Zoom.

But there is no substitute for face-to-face encounters with management for financial advisers considering leaving one firm to work for another. And that’s reflected in InvestmentNews Research data, which tracks advisers moving from broker-dealer to broker-dealer.

Financial adviser moves are up 3.8% year over year through the first five months of the year but down when compared to their most recent high in 2019. That’s when 7,591 total adviser moves occurred that January to May, compared to 7,145 over the same time period this year.

MOVES DECELERATE

So recruiting and competitive movement between firms by advisers are down 5.9% this year compared to the year before the pandemic took hold.

Observers of the broader market for financial advisers noted that recruiting is starting to resemble pre-pandemic levels, although the broader bear market is crimping some advisers’ plans to find a new employer.

“Recruiting has been pretty consistent, particularly after the first months of the pandemic,” said Jodie Papike, president of Cross-Search, a third-party recruiting firm. “In 2020, there was definitely a dip in recruiting because of the pandemic.”

“But this year’s drop in the market has caused somewhat of a slowdown,” Papike noted. “Advisers in this kind of market usually are thinking, I don’t want to go to my clients and explain a move in the middle of this kind of market.”

“Some third-party recruiters I know have struggled over the last six months, with advisers deferring any moves and the recent poor markets causing further adviser procrastination,” said Jon Henschen, a recruiter who works with independent contractor broker-dealers.

INDEPENDENTS EDGE AHEAD

In keeping with long-term industry trends, the large wirehouses have seen the most financial advisers leave that business channel while independent contractor broker-dealers, meaning LPL Financial or Raymond James Financial Services, have seen the biggest positive net gains. Over the first five months of 2022, the wirehouses saw a decrease of 869 financial advisers while independent firms saw an increase of 1,009.

More articles in this series:

• Response to inflation is likely to dominate economic policies
• Agenda-driven SEC determined to prevail despite critics’ pushback
• SECURE 2.0 occupies rare common ground, tees up progress
• Champions, critics drive ESG debate, disclosures
• Are tools smart enough for tough times? Market volatility to test advisers’ tech
• New ways of recruiting diverse talent intersect with demand