This year will be very active for advisor recruiting, with lucrative deals available, according to Mark Elzweig, who heads a New York-based executive search firm focusing on the asset management community.
Elzweig says regional firm packages, for example, can range from 60% to 100% upfront plus back end bonuses of another 30%.
According to Elzweig, demographics generate this demand for advisors. The advisor population is stagnant and aging; older advisors may not relish the hassles of a moving to a new firm. Meanwhile, barriers to entry for new financial advisors remain highless than 15% of trainees succeed in establishing a viable business.
Barriers to entry for new advisors are high for a few reasons, Elzweig said. Years ago, if new advisors had the requisite grit and determination and were willing to work long hours calling Dun & Bradstreet lead cards or cold-calling a reverse directory, they'd be successful in establishing a business. Elzweig added that major wirehouses had a certain panache with the investing public that they no longer enjoy.
Cold-calling is a much harder way to go now, Elzweig said, because people choose most professionals via referrals from existing clients. Major wirehouses have responded to this trend by hiring second-career people for their training programs: people with experience and contacts who've been successful in a previous career. Even hiring this type of trainee is no guarantee a viable advisory practice will result, Elzweig added.
With productive advisors in demand, Elzweig predicted that incentives from competing firms will remain at unprecedented levels. The momentum of advisors leaving traditional wirehouses for independent and regional firms is expected to pick up even more steam.
As retention awards continue to wind down, independence becomes a more feasible option for many, Elzweig noted in his 2013 Recruiting Outlook. As independence continues to evolve from an exotic, trail blazing choice into an increasingly familiar alternative, more wirehouse advisors will choose this path.
Similarly, Elzweig anticipated that more advisors will join regional firms.
Regional firms are user-friendly, he said, because they respect and value the mid-level producers that major wirehouses at best tolerate. There have smaller sales forces, which allows for increased access to product specialists and senior management. Payouts are stable and are rarely changed. Advisors feel especially connected to their firms.