Financial advisers shopping around for new employers have shown they like their independence.
The biggest moves by advisers in the first quarter were to independent broker-dealers, as teams managing at least $1 billion joined firms including
Raymond James Financial Inc., Prospera Financial Services and
U.S. Capital Advisors, according to data gathered by InvestmentNews.
Brokers are coping with the new fiduciary regulation from the Department of Labor. Many also are involved in merger activity, and in the case of Cetera Financial Group's advisers, a bankruptcy. For many, independent broker-dealers offer the right mix of resources.
It's “where the puck is heading,” said
Mindy Diamond, president and CEO of recruiter Diamond Consultants Inc. “That's where people are going, and it's become much more fractured than ever before,” she said of the brokerage industry.
It used to be that brokers aspired to join the dominant Wall Street firms, including
Bank of America Corp.'s Merrill Lynch, Morgan Stanley,
UBS Group AG and
Wells Fargo & Co. But as the industry evolves, they're seeing their alternatives increase, according to Ms. Diamond. Many find their way to large independent broker-dealers such as
LPL Financial or Raymond James, or smaller ones such as Prospera and U.S. Capital Advisors.
Prospera, founded in 1982, recruited a $1 billion-asset five-person team led by Andrew Toshie in Orlando, Fla. and Steve Almond in San Antonio, Texas in January from Sterne Agee Group Inc. after the company was
acquired by Stifel Financial Corp.
The team, which produces about $1.5 million of annual revenue, liked the support Prospera offered on its fixed-income trading desk, according to
Tim Edwards, executive vice president at Prospera. While about 80% of the team's assets are tied to municipalities, he said it also advises individuals on investing in government and corporate debt.
Dallas-based Prospera now has about $6 billion of assets under management, mostly from individual investors, and about 135 advisers in 23 states, Mr. Edwards said.
The firm is positioned to purchase other firms as the fragmented industry consolidates, according to Ron Edde, co-founder and CEO of Millennium Career Advisors, a recruitment firm based in San Diego.
“I think they're in growth mode,” he said. “Independents are on the rise.”
U.S. Capital Advisors, a smaller wealth manager in Texas that was founded in 2010, also recruited a $1 billion team in the first quarter: Joseph Klein, Stephen Hines and Doug Masterson joined from Houston-based Amegy Bank. U.S. Capital Advisors owns both a broker-dealer and a registered investment adviser, according to its website.
Neither Patrick Mendenhall, CEO of U.S. Capital Advisors, nor Jamie Moulle, a spokeswoman for Amegy, returned phone calls seeking comment.
Raymond James, which has been
aggressive in its recruitment of advisers while also expanding through
acquisition, picked up two large teams in the first quarter.
A $1.3 billion asset firm, Fernberger Fernberger Loeb Wealth Management in Jenkintown, Pa., joined Raymond James last month from Bank of America Merrill Lynch. Also joining Raymond James during the quarter was the $1 billion asset Goeas Group in Honolulu, which left Stifel, according to InvestmentNews data.
The industry has been shaken this year by the DOL's long-anticipated fiduciary rule, which requires brokers to act in the best interests of their clients when it comes to advising them on their nest eggs. The regulation may prompt some advisers to look for new job opportunities while spurring industry
consolidation as firms face increased compliance costs.
“We're definitely a buyer,” Mr. Edwards said. “We are currently looking at a couple of opportunities.” He declined to identify the broker-dealers, but said, “I do have expectations of something happening this year.”
Mr. Edwards sees the DOL's new rule potentially drawing some advisers away from small wealth management firms and into the hands of broker-dealers that have the scale and resources to analyze and implement the complex regulation.
Prospera's recruitment pipeline is larger than ever, with total trailing 12-month revenue of $80 million, he said, though not all the identified opportunities will turn into new hires.
The firm believes it might benefit in part from the uncertainty surrounding Cetera Financial Group after its parent RCS Capital
filed Chapter 11 for bankruptcy protection in January.
“We're seeing a lot of interest out of those firms,” he said. “There's a lot of tire-kicking for sure.”
