Commonwealth Financial to recruiters: Lay off MassMutual reps
The Commonwealth Financial Network advised outside recruiters not to engage with MassMutual's reps. The company doesn't want to step on any toes due to a licensing agreement involving a tech firm it once owned.
Commonwealth Financial Network, a leading broker-dealer and registered investment adviser, took the unusual step this week of telling outside, third-party recruiters to back away from referring reps from MML Investors Services, the broker-dealer arm of Massachusetts Mutual Life Insurance Co., known as MassMutual, a leading insurance and retirement company.
The reason? Commonwealth Financial Network and MassMutual struck a software deal two years ago, in which Commonwealth’s stand-alone technology company, Advisor360, entered into a licensing agreement that made Commonwealth’s suite of software tools available to the insurance company’s advisers, who are registered with MassMutual.
Advisor360 was spun off shortly after the licensing deal with MassMutual was arranged and is no longer part of Commonwealth, but the broker-dealer is still treading carefully between the two.
Commonwealth advised outside recruiters in an email on Tuesday it doesn’t want to step on any toes at MassMutual due to the licensing agreement. “The kicker here is, and the point of this email, that out of respect for MML, we are not actively recruiting from them,” wrote Andrew Daniels, managing principal, business development, at Commonwealth. “And by extension we cannot take MML referrals from you.”
Recruiting registered reps and financial advisers is a highly competitive, hard-charging pursuit, with lots of money and ego usually involved, so it’s rare for a firm to tell recruiters it doesn’t want referrals from one firm.
Such conflicts, however, do occur from time to time, usually between large broker-dealers who are recruiting from insurance companies that have broker-dealer networks and also package and sell products like variable annuities. In such instances, the product company can flex its muscle and send the message to the broker-dealer eyeing its advisers to back away from personnel if it wants to keep selling popular products.
Vice versa, the broker-dealer can threaten to halt the sale of the insurance company’s products if the latter is grabbing the former’s reps.
“You can be certain that Commonwealth sliced and diced the pros and cons to selling their technology to MassMutual” two years ago, said Jon Henschen, an industry recruiter. “The profits obviously were anticipated to outstrip any downside to not being able to recruit MassMutual advisers going forward.”
“When you sell anything to another broker dealer and also recruit against them, conflicts are very real,” Henschen said. “By putting up a wall on recruiting MassMutual advisers, Commonwealth has negated any potential conflict of interests.”
Daniels, the head of recruiting at Commonwealth, said the memo to outside recruiters was sent as a sign of respect.
“Given MassMutual’s relationship with our sister technology company, we have chosen to take a respectful path and not recruit their advisers,” Daniels said in an interview.
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