Choppy stock market leads to fewer wirehouse reps fleeing the coop

The stock market correction at the end of last year is being credited with putting a damper on breakaway broker activity during the first three months of this year. The latest data from Echelon Partners show that just 94 advisers exited the wirehouse channel in the first quarter, which is a 36% drop from the 147 breakaways recorded in the fourth quarter of 2018. "While the market had a huge recovery in the first quarter, you can see where the fourth quarter may have spooked some wirehouse advisers to stay put for the fear of a correction," said Carolyn Armitage, managing director at Echelon. The first-quarter breakaway activity interrupted a trend of five straight quarters with at least 120 breakaways and marked the lowest activity since the second quarter of 2017, when 72 advisers were recorded leaving wirehouses. In addition to the stock market's 13% slide during the fourth quarter, Ms. Armitage said there are some growing headwinds facing the general breakaway trend. "Most significantly, wirehouses have placed an added emphasis on improving adviser retention programs," she said. "We may be seeing these efforts pay dividends in 2019." However, Ms. Armitage added, the wirehouses are still fighting an uphill battle against such breakaway drivers as an aging adviser demographic seeking liquidity, a mature economic cycle and ample options for independence. "We remain bullish on the breakaway marketplace," she said. While breakaway activity took a breather in the first quarter, consolidation among registered investment advisers continued to climb, according to the data. There were 49 RIA acquisitions during the first quarter, the highest level Echelon has seen in the six years it has been recording these deals. That total is considered a reflection of the strength of the capital markets, which drives up valuations. Echelon is projecting 2019 will produce a record 196 RIA acquisitions, up from 181 acquisitions last year and 168 in 2017. The average assets under management of acquired RIAs in the first quarter was $1.1 billion, which is down slightly from an average of $1.3 billion for all of 2018 but continues the $1 billion-plus average seen going back to 2016.