Trailblazing Breakaways Challenge Wirehouse Model

It’s a good time to be a successful wirehouse financial advisor. Your clients are happy because they’ve reaped the benefits of a sustained bull market. There are few new advisors being trained, so your established practice is in high demand. And there are more choices than ever to give your “shareholders” the best possible return on your sweat equity.

Yes, I know employee financial advisors don’t have shareholders per se. But I suggest to the advisors I talk to every day that they are the CEOs of their own practices, each a unique profit center within a corporation that is measured and valued daily. And each advisor’s shareholders are the families that have a stake in the relative success or failure of that advisor’s enterprise.


• More advisors are leaving the industry than entering it. Wirehouse training programs, which had supplied the industry with new talent for years, have failed to match the industry’s rate of natural attrition (through retirement, death and so on). Fiercely aware of this trend, the big firms have revamped their training programs, but it will be years before the industry can tell whether these efforts will pay off in “restocking” the pool of big producers. Meantime, existing advisors will be in higher demand than ever as their numbers dwindle.

• Big firms can no longer credibly claim they have more and better tools than smaller competitors, giving sophisticated advisors and their clients more choices of where to do business. There was a time when financial planning was a novel idea. There also was a time when separately managed accounts were an innovation, and a differentiator. Only big firms were able to provide complex reports, because mainframe computers were necessary to crunch the numbers and compile the data. Now, clients check their accounts online in real time, and advisors can produce an up-to-the-minute reports of their holdings on the fly.

• Smaller firms are no longer at a disadvantage in terms of capabilities, while entrepreneurialism is creating models the industry has never seen before. Call it, “Revenge of the Big-Firm Refugees.” Dissatisfaction with career choices (or lack of choices) within the big-firm model has empowered former big-firm product and field leadership to open more new firms than ever. Years ago, the smaller firms and the independent models were capitalizing on the disenfranchised, smaller producers from the wirehouses, who were desperate for a higher payout, which they could only get outside the big-firm environment. Now, the biggest and best producers are populating all types of firms outside the wirehouses, often following expatriated ex-wirehouse managers.

So, just as prospective clients can be confused by the various models (see my column in the previous issue), wirehouse advisors can be surprisingly naďve about the breadth of opportunities available to them. If you’re a successful producer, you can tailor a move to a smaller firm to your relative strengths and weaknesses.

Or you can go to another big firm and collect a big check. First, ask yourself …


It’s easy to take pot shots at large firms, but many advisors can’t imagine working in any other type of environment. Perhaps it’s the comfort level or clout of having a brand name behind them, or the thrill of being in a large competitive branch. And wirehouse leaders prefer recruiting from other wirehouses (a tactic derided by critics as “hostage swaps”), because historically those transitioning most successfully onto their platforms come from other wirehouses.

Of course, big-firm to big-firm moves are driven by big checks. Wirehouse deals for large producers are upward of 300% of an advisor’s past 12 months’ gross production, when the back-end incentives are hit. And advisors can negotiate special interest rates for clients, raises for assistants and more.

In most cases, though, something equally compelling is also at play. Sometimes it’s dissatisfaction or discomfort with bureaucracy, or a local manager, or the commute, or the headline risk. A different firm offers to fix many if not all of the problems and makes an enticing proposition to sign on.

Still, much of the dissatisfaction among wirehouse advisors is with the wirehouse model itself. Top advisors typically bemoan policies and procedures that factor in all levels of experience and productivity. This “managing to the least common denominator” often fails to respect a top producer’s business acumen. But if you’re a successful adviser and you seek more control, you have choices:

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