At a time when many financial professionals are sweating it out over where and how to find work, top financial advisors are finding it possible to stake out their own territory and move on when it suits them. In fact, it seems that nearly half (45 percent) of all financial advisors at big banks are thinking about severing ties with their employers over the next year and a half or so.
Wirehouses and their competitors can count on only about a third (34 percent) of their financial advisory staff having no plans to leave them this year and in 2012, says a report from Aite Group. That’s almost double the amount who said they were intending to stay put last year. But a major chunk of wirehouse brokers—45 percent—are increasingly interested in breakaway, expressing more than a 25 percent likelihood of execution, says the study, which was based on a survey of over 150 advisors conducted earlier this year.
Top Producers Feeling "Freer" to Break Retention Agreements
Not only that, but top producers with big books of business are feeling freer to break their retention agreements—which have been one means of keeping advisors locked in at their firms over a multi-year period.
Often, these contracts are structured as forgivable loans, with the amount due in case of a departure decreasing with every year the advisor remains with his or her employer. But once the agreements are surpassed by the substantial sign-on bonuses that have become a common feature in the wealth management industry, all bets will be off—along with many advisors who’d been itching to go.
“Coming up for the next year, we see the top echelon of brokers being less bound to those retention packages,” Alois Pirker, an Aite Group research director specializing in wealth management market trends. Pirker tells eFinancialCareers that this is more of an issue for the wirehouses, which are more likely to offer such agreements.
A New War for Financial Advisors Brewing
In fact, Pirker goes as far as to suggest there may be a re-occurrence of the war for advisory talent that took place in the United States during 2008 and 2009, at the height of the financial crisis.
At that time, while wealth management franchises like Merrill Lynch, Smith Barney and Wachovia Securities were in the process of being acquired, and others like LPL, Edward Jones and Raymond James took advantage of the opportunity to hire unhappy financial advisors from acquired firms, he recalls.
Today, “With close to one in three wirehouse advisors being on the fence about their firm (i.e., seeing areas of satisfaction and dissatisfaction) and one in 10 wirehouse brokers being 'unsatisfied' or 'very unsatisfied' with their firm, the leading wealth management franchises like Bank of America, Merrill Lynch and Morgan Stanley Smith Barney still have their work cut out for them when it comes to maintaining a happy advisor force,” Aite Group says.
Assuming they do decide to move on, cream of the crop advisors will find many firms waiting with open arms. As we reported recently, “pure” Registered Independent Advisors (RIAs), as well as dually registered advisors affiliated with broker dealers, are increasingly bringing in seasoned people and “test driving them” for a possible ownership fit. Those most attractive to other firms will have five to 10 years of experience.
The stakes are high, with a third of RIA firms offering equity ownership to their advisors after a period of time, according to one study.
Bottom line: The exodus of top-echelon advisors could wind up “ripping a big hole into asset abase of large broker dealers,” particularly if they leave seeking independent RIA status, says Pirker.
Thus, advisors who’ve done particularly well will find employers eager to woo them with cash and other perks over the next several months.