Autonomy tops broker wish list, survey finds

A demand for resources also ranks high

Mar 15, 2004 @ 12:01 am

By Bruce Kelly

Brokers and investment advisers want their firms to give them more autonomy, and they are continuing to demand better support for fee-based business, according to a recent survey.

Wirehouse broker-dealers, meanwhile, are looking to attract and lock up recently recruited brokers and investment advisers by reconfiguring their recruitment and retention programs, according to the survey by Cerulli Associates Inc. of Boston.

For some time, brokers have wanted "quality support" for fee-based money management programs and "are expecting a level of resources," said Matt McGinness, associate director with Cerulli.

But it isn't likely that many firms with independent or affiliated registered representatives will grant such freedom to their brokers, he said. "Not all independent broker-dealers are willing to provide advisers with what they want," Mr. McGinness said.

`More freedom'

In the survey, 80% of brokers said that the most important factor in the decision to leave their firm in the next few years was autonomy.

Some brokers and advisers "chafe at management structure constraints that they feel hamper their business, and eventually decide that they need more freedom to chart their own course," according to the report.

Mr. McGinness said "hundreds" of brokers, advisers and recruiters participated anonymously in the survey, which was conducted in the fourth quarter.

The second-most-important reason advisers were considering leaving their firms, at 34%, was the demand for resources.

Just 17% said that a firm's payout was the most important reason for making the decision to change firms.

The fact that brokers and advisers are looking for greater freedom spells good news for "a select number of firms likely to benefit from advisers who want more autonomy," Mr. McGinness said.

He added that those include such firms as Linsco/Private Ledger Corp. of Boston and San Diego, and the two leading broker-dealer networks owned by insurance companies: the AIG Advisor Group Inc. and the recently renamed ING Advisors Network Inc.

Signing bonuses for brokers doing fee-based business and for clean compliance records are as important as ever, according to Cerulli.

But firms are making some changes with the intent of digging their hooks into their brokers.

"The level of scrutiny brokers are subjected to, to get the deal, is pretty high," said Danny Sarch, a brokerage recruiter in White Plains, N.Y.

"Brokers have to subject their books of business to forensic analysis."

To retain some recruits, firms are extending the repayment periods for upfront bonuses and revising schedules of stock options plans, lengthening the period to 10 years before a broker or adviser is fully vested, according to the Cerulli survey.

Jumping ship?

Such upfront bonuses became an industry practice in the 1980s, Mr. Sarch said, and at first, the deals typically ran for three years.

The long-term nature of the bonus spreads out the payment and gives the broker a greater tax advantage, he said.

That - plus the size of the deals, which can run higher than 100% of a broker's trailing 12-month gross commission - is pushing increasing numbers of brokers who have spent their entire careers with one firm to think about jumping ship.

The deals aren't necessarily all upfront money, Mr. Sarch added. Firms are also paying brokers for delivering a certain percentage of the assets from their previous firms along with a lump sum.

"The money is so compelling now that certain longtime brokers" - including veterans with at least 20 years' experience - "are considering it for the first time," he said.


What do you think?

View comments

Recommended next

Upcoming event

Nov 13


Top Advisory Firm Summit

Formerly known as the Best Practices Workshop, this new one-day conference will also include content from the Best Places to Work event!The Top Advisory Firm Summit will provide CEOs, COOs, CTOs, CMOs, and Managing Partners from the... Learn more


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 It'll help us continue to serve you.

Yes, show me how to whitelist

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


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print