The Hartford’s announced intention to sell its large independent broker-dealer, Woodbury Financial Services, has created tremendous uncertainty for advisors, industry observers say.

When the insurance giant, under fire from its largest shareholder, hedge fund manager John Paulson, recently announced plans to sell Woodbury, the firm did not identify potential buyers, say when a sale might be final, or explain how the transition will be handled, says Larry Papike, founder of Cross-Search, a Jamul, Calif.-based recruiting firm specializing in financial advisors.

The uncertainty creates unnecessary distractions for advisors at a time when clients are beginning to have more confidence in the markets and investing and need their advisors’ attention, he says.

“This is unbelievably disruptive to the advisors at Woodbury,” Papike says. “Advisors are bound to ask: ‘Who will be the buyer? Will we have to change clearing firms?’ It immediately puts the advisors’ practices upside down because they don’t know what’s next.”

A spokesman for The Hartford, Robert W. DeMallie, did not have immediate comment on how a potential sale would affect Woodbury advisors.

The Hartford also announced that it plans to sell or find other strategic alternatives for two other businesses, Individual Life and Retirement Plans, in addition to Woodbury.

Woodbury Financial ranked 20th on Financial Planning’s 2011 ranking of the industry’s largest and fastest-growing independent broker-dealers. By the end of 2011, it had 1,600 advisors and $251 million in revenues, says DeMallie, director of external communications for The Hartford’s wealth management division. The moves are part of a larger plan to focus on the insurer’s property and casualty, group benefits and mutual funds businesses. The company says it plans to wind down its individual annuity business, halting new sales effective April 27.

The Hartford has several options in terms of buyers for Woodbury, according to Chip Roame, managing partner of Tiburon Strategic Advisors. “On any list of potential buyers, one would need to include LPL, FA Holdings, Ladenburg Thalmann, Cetera Financial and other existing independent broker-dealers,” Roame says.

Private equity firms such as Warburg Pincus and Parthenon, which have made big purchases in the financial advisory market, also need to be considered, he says.

But Woodbury Financial’s clearing relationship with Pershing, and its insurance company parentage would likely winnow the field down to Cetera Financial and Lincoln Financial, among one or two others, Roame says.

For the moment, Woodbury Financial Services advisors are bound to be besieged with calls from recruiters all across America trying to lure them away to other firms, Papike says. He added that one of his advisor contacts has gotten between eight to 15 such phone calls in one day already. There are also competitors who will likely compete for clients by arguing that their firms are not experiencing The Hartford’s issues right now, he says.

“As the phone is ringing off the hook, advisors are trying to run their practices,” Papike says. “I don’t see that there was a lot of thought given to the advisors.”

Donna Mitchell writes for Financial Planning.