Fleeing the Wirehouse: Will the Big firms be able to change to meet the challenge?

In December 2008, according to Discovery Database, 981 Wirehouse Advisors moved. This was the height of the panicked Advisor marketplace, where Financial Consultants at the Big 5 (at the time) wirehouses looked to get a deal in order to recapitalize the money that they had lost as their own company's stocks cratered. Remarkably, 744 of those 981 moved to another Big Firm (76%). (Sarch's note: all the statistics cited here are provided by Discovery Database). Fast forward one year to December 2009. Most Advisors will tell you that they feel more secure about their firms, even though they might be unhappy with bureaucracy and the myriad management changes at their firm. Not surprisingly, overall movement is down dramatically: only 425 wirehouse Advisors moved in December 2009, less than half the number from last year. Considering the panic and the unique circumstances in 2008, that should not surprise anyone. What stands out to me is that only 161 of those that moved, 38%, moved to other wirehouses. To summarize, fewer than half as many wirehouse advisors moved at all in December 2009 when compared to December 2008, and of those that moved, only 38% went to another Big Firm! Earlier this week, the venerable Wall Street Journal had a front page article describing the breakaway Advisor phenomena. (Disappointingly, that article did not differentiate between Advisors going RIA and Advisors going to an independent Broker/Dealer.) And there have been various reports showing that wirehouses as a group have been losing assets for several years to the RIA channel. In my conversations with Big Firm executives over the years, as a group they have been largely dismissive of Regional Firms and Independents: “They can't match our capabilities, they are not as sophisticated.” Their anger in the recruiting wars was always directed at the Competitor Across the Street. Since mostly smaller producers went independent or to smaller firms, the Big Firm arrogance welcomed their smaller competitors' recruiting as pruning their weeds (i.e. smaller producers) from their bountiful big producer garden. Attention Wirehouse executives: You have the most envied franchises in the industry (that's why everyone is gunning for you). Either recognize AND fix the true reasons why your clients and Advisors are seeking alternative solutions (perhaps talk to the better ones who have left?) or stand by and watch the bleeding continue. The challenge is real and not going away.