Will Breakaway Broker Trend Continue in 2012?

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The breakaway broker trend of financial advisors leaving traditional wirehouses for independent waters is just beginning to heat up.

“The lead dogs … have gone independent and the next crop of wirehouse advisors is watching them,” Charles “Chip” Roame, the chief executive officer of Tiburon Advisors, told an audience of financial executives at the Tiburon CEO Summit XXII at the Ritz-Carlton Hotel in New York on Tuesday. “They are watching companies like HighTower pick up big producers and there may be a big flood coming behind them.”

Twelve percent of financial advisors change firms annually, according to Roame, but two-thirds of those advisors are still “landing” at another wirehouse. Roame said he expects more advisors to shift to the independent channel. “I think the big elephants have moved,” he said. “The more interesting thing is who might follow.”

Roame said HighTower Advisors is an interesting example. The Chicago-based company is among a growing list of aggregators attracting advisors from the wirehouses. Ninety-two percent of HighTower’s advisors have been “picked off” from traditional wirehouses, he said.

Roame said the big question remains: How will the wirehouses repond? “If the wirehouses want to retain advisors it is called 350% of trailing 12 months and I guarantee advisors will stay,” he said.

Roame said he expected one of the wirehouses would have already responded was by creating a “halfway house” as an alternative for advisors that were considering independence. This “halfway house,” which he predicts will happen at some point this year, would enable advisors some of the benefits of independence and ownership while remaining under the wirehouse umbrella.

The big wirehouses are not “naïve,” Roame said. “They will either retain advisors by bribing them or by creating a halfway house.”

In general, he said, consumers are “scared, scarred and skeptical” and many are considering “self-service” because they are “skeptical of the whole industry.”

“There is a self-serve revolution going on out there,” Roame said. 

Matt Ackermann writes for Financial Planning.


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