A recruiting war for recruiters

Amid the typical competition for top adviser talent, there has been another recruiting war unfolding this year over the recruiters who can get those advisers in the door.
As firms look to expand their wealth management business and newer players vie for their share of assets, internal recruiters (those employed by firms, often in executive roles) are in high demand. A musical-chairs-like game has been playing out in the first six months, with firms trading and poaching veteran recruiting talent in a reflection of the ever-growing demand for top advisers.
“Now it’s a good time to invest in the growth of what is very much a core business,” said Mark Elzweig, who runs his own external (or third-party) recruiting firm. “Everyone realizes that the wealth management operation is a steady-Eddie source of profits, and it’s a real priority now.”
The moves are anecdotal, since individual recruiter moves are not tracked. But Mr. Elzweig and others agreed there seemed to be an uptick this year amid an almost unending list of moves.
Wells Fargo Advisors Financial Network recently picked up a long-time LPL recruiter, Joseph Line. Another LPL recruiter, Jeff Draper, left the firm to go to NFP Advisor Services Group in May.
At the same time, FiNet lost Kimberly Hollenbeck, who reportedly brought in around $15 million in revenue last year, to Hightower Advisers, a hybrid broker-dealer and investment adviser in Chicago. FiNet is already in the process of looking for a replacement, according to spokeswoman Rachelle Rowe.
Part of the demand may be because of the growth of firms such as HighTower, which were founded around the 2008 financial crisis and which have been aggressively recruiting talent in recent years.
“The independent space is moving fast,” said Mindy Diamond, another outside recruiter with an eponymous firm. “There is more competition now than ever before as the landscape has expanded.”
Ms. Hollenbeck’s departure followed that of her former manager, Ron Sallet, who left in January to go to Dynasty Financial Partners, a platform and service provider for registered investment advisers founded in 2008.
Although she acknowledged that competition had increased, Ms. Diamond said she did not think there was an exceptional number of internal recruiters moving.
“Each of these departures … were all for different reasons,” she said.

As firms from Raymond James to Morgan Stanley report record earnings almost quarter after quarter, firms are reinvesting some of those profits back into recruiting.
Top internal recruiters receive a base salary, but most of their compensation is through commissions based on the revenue of the advisers they bring in to the firm, according to Ron Edde, founder of an external recruiting firm, Millennium Career Advisors. At the highest level, internal recruiters may also benefit from receiving stock or options in the firm.
All told, annual payout to recruiters who bring in $10 million to $15 million in annual revenue could approach $500,000, although that varies widely by firm, according to estimates from external recruiters interviewed for this story.
Even large registered investment advisory firms are getting in on the game by hiring chief operating officers who can recruit for growth or succession planning.
Focus Financial Partners’ recruiter Michael Paley left earlier this year to become a chief operating officer at Klingman & Associates, a registered investment adviser with $1.3 billion in assets under management, and will help recruit and grow assets toward the $3 billion to $5 billion range.
“Everyone’s always had [internal recruiters],” Mr. Elzweig said. “But with new players coming into the business and people beefing up their own internal recruiting teams, it’s fueling movement.”
Another Focus recruiter, Richard Gill, who helped bring in breakaway brokers from the wirehouses, left to join Affiliated Managers Group Inc. this month, while Focus announced in June it had picked up former Merrill Lynch manager Chris Dupuy to help recruit.
A spike in recruiter hiring jibes with other moves investment firms have been making to land top talent. Many firms, for example, have ratcheted up the amount of money they are willing to pay top producers.
Ameriprise, which has both independent and employee brokerage channels, confirmed it recently upped recruiting deals to as much as 340% of trailing-12 month revenue, a number that competes with, and in some cases exceeds, the offerings from larger wirehouse firms.
Wirehouses also have been opening their checkbooks to lure large teams. UBS Wealth Management AG, for example, said that in the first quarter it spent $180 million on compensation commitments related to loans for recruiting veteran advisers. That was up from $171 million in the year-earlier quarter.
“There is heavy, heavy pressure being applied to the branch manager level to recruit, and the competition is fierce,” said Mr. Edde.
“It’s probably worse than I’ve ever seen it.”