RIAs are the hot date on prom night much to the chagrin of the IBD wall flowers

The movement of wirehouse advisors to the independent channel is off so far this year.

Investment News reports the following:

Independent broker-dealers recruited only $426 million from three teams in the first quarter this year, according to announcements from about 20 independent-broker dealers tracked by Investment News’ Advisers on the Move database. That compares with $1.23 billion and five teams recruited by independent firms in the year-ago quarter.

Not only are advisor moves to the independent channel down, but job hopping among IBD’s is at modest levels. Two factors are hampering IBD recruiting efforts: the bull market and stiff competition from the RIA channel.

First, no matter the type of advisor — independent, wirehouse, or regional — a bull market keeps many tethered to their firms. It’s happy hour.

Corporate mergers — which often prompt brokers to bolt — aren’t as big an incentive during a bull market either. Advisors didn’t flee the Cetera firms after they were acquired by RCS  Capital. Normally takeovers  are more disruptive. There’s always someone who doesn’t like the new parent company.

Plus newly merged firms typically wave big retention bonuses in front of wirehouse advisors they really value. The big producers know they can draw mega deals to move; their firms  work overtime to distract them from what’s out there with what is right where they are. Independent advisors don’t have the same financial smorgasbord laid out for them. They typically reap a payout on their revenues of 90% — about twice as much as wirehouse producers. That system doesn’t  leave a lot of room for big recruiting deals.

But for the RIA recruiters, the recruiting business is looking much brighter. Wirehouse advisors are coming to look more and more like RIAs. So the businesses don’t seem so alien to one another.  Cogent Research estimates that fee-based business will comprise 70% of a wirehouse advisors revenue stream by the end of this year. Advisors who are 75% fee based are good candidates for the RIA channel. The RIA model affords advisors the ability to boost their net. They can earn a 100% payout and lower their ticket charges vs IBDs. And there’s another bonus: No. More. FINRA. Awww. The SEC and State regulators become the new regulatory prom dates.

Graduation time is just around the corner.

About Mark Elzweig

I am an executive search recruiter with an inside track on financial advisors, the asset management industry, and Wall Street. My work has appeared in numerous publications including On Wall Street,AdvisorOne, and Fund Fire. Journalists regularly seek me out, so you catch my bon mots in The Wall Street Journal, Research Magazine, Reuters, and more. You can follow me on Twitter @elzweig or you can reach me directly at 212-685-7070 or elzweig@elzweig.com.
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