More reps bolt from Waddell & Reed, including some it would have liked to have kept

The broker-dealer lost 56 brokers and advisers in the third quarter, and not all of them low-producers the firm wants to shed

Oct 31, 2018 @ 3:49 pm

By Bruce Kelly

Waddell & Reed Financial Inc. lost another 56 brokers in the third quarter, as senior management continued to stress its strategy of shedding low-producing talent and building the firm around its most productive advisers.

For the 12 months ended in September, Waddell & Reed lost 407 reps and advisers, a decline of 27.5% from the previous year. The firm now has 1,074 advisers.

The minimum annual fees and commissions the firm has set for its advisers to generate is $125,000, noted Shawn Mihal, president of the firm's broker-dealer, during a conference call on Tuesday with analysts to discuss company earnings. The average adviser leaving Waddell & Reed produces $112,000 in fees and commissions, or less than the company target.

Management at the firm this year has said that it was focused on retaining high-performing financial advisers, but some large teams also left over the summer.

InvestmentNews in August tracked two such teams. Oxinas Partners Wealth Management is based in Jeffersonville, Ind., and had three advisers with at least $1.7 million in fees and revenue last year. The other was a top team in Northern California, Elaine and Scott Manley, who produced $1.6 million in annual fees and commissions.

"We did see that uptick from the last quarter to this quarter with regard to some increases in the production that was lost with three large groups that had departed the organization," Mr. Mihal said. "So, we're continuing to focus on that and continuing to work on efforts to retain advisers with the broker-dealer and focusing recruiting efforts with respect to higher-performing advisers as we move throughout the course of this year and 2019."

The firm is also looking to focus on recruiting advisers with more assets.

"We're making meaningful progress in our move toward a more competitive, sustainable broker-dealer model that prioritizes the retention and recruitment of high-performing advisers," wrote company spokesman Roger Hoadley in an email. "We believe the steps we're taking will help to mitigate any unplanned departures of higher performing advisors going forward."

As it realigns the broker-dealer, Waddell & Reed has seen an increase in the productivity of its advisers, according to its company earnings release. The average adviser at the firm at the end of the third quarter produced $350,000 in annual fees and commissions, according to the company. That was an increase of 45.8% compared with $240,000 at the same time last year.

Lower producing brokers are the least profitable in the industry, and brokerage firms routinely raise minimum production requirements and cull ranks when they want to boost their bottom line. The shift in strategy happens routinely with firms that are looking for growth. Many of the advisers who do not meet the new targets for annual fees and commissions find employment at smaller firms or simply leave the securities industry all together.

"A majority were at lower production levels and joined established Waddell & Reed teams with higher performing advisers who are growing their practices," Mr. Hoadley noted. "As such, we are seeing an increase in the number of adviser associates. And some chose to leave the business and engage with an existing Waddell & Reed adviser to sell their book."


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