The demand for financial advisors is strong, seeming to belie the tumult and layoffs impacting many other finance professionals.
In an exclusive interview with eFinancialCareers, John Hyland, managing partner at Private Advisor Group, the largest branch office at LPL Financial and a growing hybrid registered investment advisor (RIA) firm, speaks about the trend, as well as the role of independent broker-dealer firms.
eFC: You describe Private Advisor Group as a hybrid RIA firm. Can you explain exactly what that means versus a full-fledged RIA? What is it like working for an RIA versus a hybrid RIA?
Hyland: Our hybrid RIA offers a platform to manage both fee- and commission-based clients. Hybrid advisors can objectively deliver the services and solutions that are most appropriate based on each client’s unique situation. Compared to hybrid advisors, fully independent RIAs do not conduct brokerage business. Private Advisor Group charges no admin fee in the hybrid platform, which allows for a higher net payout on advisory business than any other competitor.
eFC: What do you see as the biggest benefits in working for an independent broker-dealer versus working for a wire-house?
Hyland: The exodus from wire-house to independence speaks for itself. Wire-houses continue to lose market share to the independent channels. One of the greatest benefits of independence is having greater predictability in revenue. Additionally, the fee-based model provides an easier to understand pricing model for clients. Advisors affiliated with independent broker-dealers enjoy greater ability to develop and grow their own business, deliver more customized solutions and handpick their own team.
eFC: What do you think is going on at the wire-houses, given a report from Tiburon Strategic Advisors that indicates that four wire-houses have dropped about 13 percent of their sales force during the past two years? They also noted that about 6,500 wire-house brokers switched firms in 2009, up from 5,200 in 2008.
Hyland: I agree with Tiburon, which says the breakaway broker market is a lucrative one. Tiburon cites data that independents have both higher assets under management and client retention rates, and generate more revenue than the average financial advisor. Owning their own book gives independents the freedom to sell their business or purchase another advisor's book to augment their own.
eFC: What sort of person is best suited to work as a financial advisor? What skills, background and certifications are needed?
Hyland: Some common traits that correspond to success at our firm include a growth-oriented, entrepreneurial drive, a well-established book of business built on long-term relationships, more of a service mentality than a sales mentality and an ability to be comfortable taking ultimate responsibility for running their practice as a business. Many of our advisors hold professional designations, in addition to their Series 7 (and other) FINRA licenses.
eFC: What training and development should a new financial advisor look for before starting with a firm, and what sort of training do you provide at Private Advisor Group?
Hyland: Wire-houses used to offer extensive training programs for recent college graduates. These programs have largely been scaled back. A notable exception is LPL’s new venture unit, which supports advisors who are new to the industry and who are dedicated to serving mass-market clients. I would advise recent college graduates to look for these types of programs.
eFC: Obviously, financial advisor income is primarily based on fees and commissions generated. What sort of trends are you now noticing as far as the industry standard for compensating financial advisors?
Hyland: The trend that we’re seeing is movement toward a fee-based model. Varying by the previous year’s gross production, Private Advisor Group offers up to 97 percent payout on LPL Advisory with no admin fees.
eFC: Considering the job market, there are many finance professionals looking to change careers and move into a financial advisor role. What advice would you give to them, and when is it a wrong move?
Hyland: According to Pershing, more than 200,000 advisors will join our ranks in the coming decade, replacing retiring financial professionals and handling the surge in demand from an affluent Generation Y. My advice for this next generation of advisors is to pursue growth opportunities aggressively. The next generation of advisors will have grown up around all things Internet. They rightly question established rules of engagement in the industry. Growth opportunities will abound in the coming decades, and new advisors would be wise to utilize the new Web-enabled toolsets in front of them to identify, quantify and pursue growth opportunities.
LPL Financial is the nation’s largest independent broker-dealer based on total revenue, according to Financial Planning Magazine.