With more career options than ever before, financial advisors have been job-hopping at a furious pace this year.
Dissatisfied with wirehouses but unwilling to completely strike out on their own, many are migrating to independents and regional firms, while others move within or among the wirehouses, or leave for boutique firms and RIA’s, according to a report. They’re also being paid near-record deals to move, not only by wirehouses but even other firms hungry for talent.
Industry recruiting firm Diamond Consultants published a paper earlier this month looking at trends in the first half of 2022 across the wealth management industry. Among them: “Advisors are changing firms and models with near record frequency,” the authors wrote, adding that “movement begets more movement” as peers watch each other and decide to follow suit. Even without protocol protection such as in the case of moves to and from UBS and Morgan Stanley, the authors wrote, many advisors were still successful in transitioning — often thanks to a cottage industry of specialist businesses and law firms that sprang up in recent years to facilitate their moves.
“The primary drivers are the push from frustrations with and limitations at their current firm and the pull of an exciting array of opportunities in a much expanded industry landscape,” the authors wrote, consistent with “evergreen” trends of recent years. In particular, too much bureaucracy, unhappiness with changing pay structures, pressure to work more for less pay, and “managing to the lowest common denominator” were common reasons for leaving the large firms, the report said.
Add to that a “historic” seller’s market for talent, and the result is “recruiting wars are showing no signs of slowing down,” the authors wrote. Advisors make “in the ballpark of 250- 350% of T12 for W-2 advisors, and 30-100% of T12 for independent advisors” to move, even in the face of recent market volatility. But if volatility continues or big firms improve retention, advisor moves might cool down, the authors wrote.
Based on the available data, Diamond noted 4,249 advisors, each with over three years of experience, moved in the first half of 2022. The data was based on a combination of reports by industry researchers and Diamond’s in-house deals data.
Of those moves, many were away from the wirehouses. The “big four” — UBS, Merrill Lynch, Wells Fargo and Morgan Stanley — lost a net 333 experienced advisors with the traditional wealth unit of Wells Fargo, Private Client Group, losing the most: 213 net advisors or 2% of headcount at the firm.
“Wells Fargo had the hardest time retaining advisors because of the bad press” the firm had in the past year, said Andy Tasnady, an industry compensation expert and managing partner of Tasnady & Associates, in an interview, though he noted that in wealth management “most of the financial advisors really survive on their personal reputation.” On the other hand, the smaller independent unit at Wells Fargo Financial Network gained a net 95 advisors, many of whom were moving within the firm.
Independents (which the report classed as IBD’s plus RIA’s, hybrid RIA’s and insurance BD’s) were the biggest winners, with a net gain of 287, followed by regional firms which netted 173 advisors. Boutiques such as Rockefeller Capital Management, First Republic and JPMorgan saw a net loss of 127 advisors, but some among them proved attractive, especially as they proved willing to beat wirehouse offers.
‘So many more options’
“There’s been a 20-year trend, as competitors come in, that the wirehouses have higher attrition rates,” Tasnady said. “There’s so many more options for individuals, different career types, more types of companies. And it’s easier to transition than [it was] 20 years ago.” To some extent it’s also a reflection of expense discipline for those companies, as the best advisor teams are costly to hire and cut into profits, Tasnady said.
Morgan Stanley was the only one of the four wirehouses to gain, with a net 87 advisors, due to a combination of aggressive recruitment and lower relative headcount loss — it gained 221 but lost only 134, the report said. In an interview, co-author Jason Diamond said a focus on recruiting, willingness to pay aggressively high for deals, and excellent tech capabilities for advisors made the firm compelling for talent.
Still, wirehouses have a continued draw for advisors seeking safety. “There are still plenty of advisors making the move to the wirehouse world,” the report authors wrote, noting that there was brand prestige and generally the highest pay at these firms.
Diamond added that “wirehouse advisors tend to be the largest and most productive advisors in the industry. So I do think some of the data masks a bit of what’s happening beneath the surface. If you look at that data, you’d think the wirehouse space is doomed. And that is certainly not our takeaway.”
Still, there was a noticeable shift toward independence from wirehouses that would have been “almost unheard of” 10 or 15 years ago, the authors wrote.
The pandemic accelerated this, Diamond said.
“We saw quite a bit of movement during the pandemic …. People just had the privacy to do due diligence without the walls listening, because largely people are working from home,” he said.
Additionally, when advisors worked from home, they might have felt less reliant on their big firm’s brand and resources, Diamond added.
Culture First
Money wasn’t everything, though. “Value proposition, culture, a seat at the table” and equity have become increasingly valuable to advisors, the report authors found.
Just this past week, regional RBC Wealth Management reflected the complexity in these changes when it signed on The Nolan Group, a veteran father-and-son team from JPMorgan managing $1 billion in client assets.
“The firm’s client-first culture was a significant attraction for us and our clients,” Brian Nolan, an advisor on the team, said about RBC in a statement.
The Diamond report authors said RBC, which netted 32 new advisors, was “one of the more successful firms in competitive recruiting” in the first half of the year, adding that as a regional, “their success was due in part to a value proposition that centers around offering all of the same capabilities as the wirehouses, but allows much more autonomy and control over how advisors run their businesses.”
At regional peer Janney Montgomery Scott, which also had a noticeable net gain this year of 10 advisors amounting to a 1% headcount growth, director of recruiting Diane Gabriel said the smaller and more personalized approach it took to recruiting helped with attracting talent.
“We know every single advisor. When we recruit, we don’t do these large recruiting meetings,” she said. Gabriel is a former advisor herself and someone who was recruited a year ago from Wells Fargo.
Compared with large brokerages, smaller regional firms still offer a sense of regard for the advisor-client relationship, Gabriel said. This had eroded across the big firms during her 40 years in the business, “especially those that merged with banks. The wealth management portion of the enterprise became a less significant part of the overall organization,” she said, meaning advisors were alienated from their clients.
“Relationships that [advisors] used to value and hold dear have really just dissipated. Over the years, this business has become commoditized,” Gabriel said. “The key differentiator is the people. It’s the relationships.”
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