Although the number of brokers who change jobs in 2010 won't approach the level seen during the financial crisis, expect this to be a good year for broker recruiting, according to recruiters, who anticipate that the quality of advisers on the move — and the value of assets in transition — could rise.
“There are long-tenured advisers who chose to wait it out [last year],” said Barbara Herman, a senior consultant with Diamond Consultants LLC, a recruitment firm. “They are members of large, senior, high-profile teams and have really committed to each other; this is the year they are seriously going to evaluate” a possible transition.
“Top advisers now tell us they will never say never about a future move,” she added.
Broker movement peaked during the first quarter of last year, according to Discovery, which tracks broker and adviser movements. From August 2008 through November 2009, 11,875 wirehouse reps and 1,687 regional firm reps changed firms, according to Discovery.
Last year, after suffering huge losses on company stock, many wirehouse brokers grabbed upfront deals under which they must pay back any unearned portion of their forgivable notes when they leave.
Since some brokers don't want to give up the money if a new employer won't make them whole or if the broker isn't in a position to pay them back, these promissory notes are “definitely an impediment” to getting brokers to move, said John Mabee, national director of branch development at Robert W. Baird & Co. Inc.
The fact that so many brokers already have moved or taken retention deals also could help reduce movement this year, recruiters said.
The universe of wirehouse brokers — consisting of those at Merrill Lynch & Co. Inc., Morgan Stanley Smith Barney LLC, UBS Financial Services Inc. and Wells Fargo Advisors LLC — totaled about 55,000 as of September 2009, according to Cerulli Associates Inc.
Typically, a bit more than half of the wirehouse brokers moving to another firm go to a rival wirehouse, and those reps are likely to have accepted a transition package already.
Some 15,000 reps at MSSB, Merrill and UBS may be bound by some kind of retention package, based on press reports and company estimates.
Regardless of any retention package ties, high-producing advisers who didn't want to move in a volatile market are now looking across different channels to change firms, said Bill Morrissey, executive vice president of business development at LPL Financial.
Surprisingly, clients are driving advisers to look for a new home, said Larry Papike, president of Cross-Search, a recruiting firm for independent reps and executives.
“For the first time in my 35 years [in the recruiting business], I see clients talking to advisers about going independent,” he said, noting that the allure of being associated with a big Wall Street name has waned.
“You can't underestimate what has happened” to diminish the wirehouses' brand, agrees recruiter Danny Sarch, founder of Leitner Sarch Consultants Ltd.
What's more, the mega-mergers of the big firms “just aren't working out,” Mr. Mabee said.
Last year, Baird, which has about 660 retail producers, recruited a record 101 brokers and producing managers, “and we'll approach that [number in 2010],” he said, noting that many wirehouse brokers are waiting out the downturn while looking for alternatives.
Recruiters said recruitment packages should stay at their current lofty levels — a total of 300% or so of annual production for top recruits, assuming that a broker meets asset and production targets over a number of years.
“There's a scarcity now of top-flight advisers, so firms will spend whatever it takes” to recruit them, said Mr. Papike. He added that branch consolidations at big firms also will spur movement among lower producers, who are still attractive for independent firms.
Wells Fargo was the lone holdout on a retention package among the majors.
Last month, UBS offered its brokers a package totaling up to 65% of past production if they meet growth targets and stay at the firm.
“Most big [producers] are under some kind of deal,” Mr. Sarch said, “but the deals are not enough to stop people from leaving” if they really want to.
Observers said that the consolidation of big firms that drove many brokers to depart isn't likely to happen again “unless something happens with UBS,” said Darin Manis, chief executive at recruiter RJ & Makay LLC.
Rumors persist that Swiss banking giant UBS AG plans to dump its U.S. wealth management business as it struggles to repair its balance sheet.
“Every time something like [a sale or merger] happens, you get a big spike in broker movement,” Mr. Manis said.
E-mail Dan Jamieson at [email protected].
