When seemingly every broker-dealer wants to increase its rep count — at a time when the total population of financial advisers is in the process of shrinking — is it possible for anyone to actually win the so-called recruiting wars?
The answer may lie in some of the key themes and developments in the industry that we've regularly reported on over the last several months.
At the top of the list are some ambitious recruiting targets for dozens of firms — and not just small firm that aspire to be mid-sized firms. Indeed, the largest players in the business want to add hundreds of reps this year: LPL, the biggest independent broker-dealer out there, wants to add 400
net new reps this year.
Likewise,
Edward Jones wants to bolster its brokerage count by a net new 600 reps this year.
UBS wants to add 150 new reps, the same target as Robert W.
Baird & Co., while Waddell & Reed aims to add several hundred advisers to its 1,700+ rep count. And even just today, Dow Jones
reported on
U.S. Bank and its plans to add more than 100 new advisers by the end of 2011.
Those are just six firms that have
recently been written about. Combined, they're aiming to add almost 2,000 net new reps this year.
For some perspective, the roughly 100 independent broker-dealers that we survey each year had a combined 123,682 reps as of Sept. 30, 2010.
One year earlier, these same exact firms had 125,820 affiliated reps — a drop of 2,138 reps, or 1.7% (For more info on the largest firms in this channel, visit the
InvestmentNews B-D Data Center.
The wirehouse channel has also suffered from some much publicized — and major — shrinkage in recent years, some by design and some by default: In 2005, the major wirehouses had 64,058 brokers in total, according to
Cerulli. By 2009, that number sank to 50,204, a drop of nearly 14,000 brokers, or 22%. (Side note: While the RIA channel has shown growth — increasing in size to 19,681 at the end of 2009, up more than 20% in since 2005, the total population of financial advisers has still dropped by nearly 2% to 334,160 over the same period, according to Cerulli.)
So where will this 'new' group of 'net new' advisers come from that B-Ds are now collectively coveting? There are only so many QA3, GunnAllen or Jessup & Lamont reps to go around. By our count, firms such as these three, which have shuttered over the last 12-18 months, have put some 2,432 reps on the market for new B-Ds.
The recruiting goals, of course, are not just to tread water — firms will have to add, in some cases, up to four times their absolute recruiting targets simply to offset their normal attrition rates (See: Edward Jones) to hit their 2011 goals.
Those numbers get more astounding when you look at the industry as a whole: If a somewhat typical attrition rate of say, 10%, was applied to just the independent B-D channel, that translates to more than 12,000 reps at independent broker-dealers who would change firms
just this year.
So the good news is, it would seem that thousands of reps could be yours for the taking.
The bad news is, those thousands of reps could be yours for the taking.
The firms that win the recruiting wars will likely be firms that
over-leverage, open up the coffers and go on an acquisition spree already simply lose the least. Even then, acquiring new reps is getting more expensive than it's ever been (read Mark Casady's quotes on the new math of acquisition costs), so it will take time before firm's can start to reap the rewards for new recruits.
And they can only reap from what they keep.
