Recruiting slows in Q3, with moves down 4.4% vs. 2021

High inflation, poor market returns, rising interest rates and their anticipated impact on the economy may have advisers staying put.

Recruiting activity among advisory firms slowed considerably during the summer as the industry continued to face economic headwinds, according to the latest Advisers on the Move data.

Through September, total moves of experienced advisers between firms fell 4.4% compared with 2021. Year-to-date recruiting activity was just ahead of the pandemic-skewed year of 2020 but 14.3% below 2019. The data exclude moves between related firms and those resulting from a merger or acquisition.

Much of the slowdown occurred in the third quarter. But don’t chalk that up to beach vacations and summer reading. Since 2010, the third quarter has accounted for exactly 25% of annual recruiting activity on average, meaning there is typically no meaningful seasonal impact on the numbers.

Activity from July through September was especially low relative to comparable periods of recent years. Third-quarter recruiting on its own was down 6% year-over-year from 2021, 3.7% from 2020 and a whopping 20.4% from 2019.

High inflation, poor market returns, rising interest rates and their anticipated impact on the economy may have advisers staying put. According to InvestmentNews Research polling data, for the past three quarters, most advisers have been anticipating at least a yearlong economic slowdown. In the most recent quarter, market sentiment among the industry was at its lowest since at least mid-2020, with 29% of advisers expecting stocks to slide further over the next year.

Firms, meanwhile, appear to be looking to grow in larger bites. While individual recruiting activity is down, mergers and acquisitions in the industry are set for new records despite the dismal macroeconomic environment.

Even if overall recruiting is smaller compared with recent years, it has maintained a similar shape, with advisers largely leaving wirehouses for registered investment advisers and independent broker-dealers — though Morgan Stanley continues to buck that trend, ranking among the top firms in net gains this quarter.