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Intensified competition keeps wirehouses from chopping their grids

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Wirehouses have largely gotten the message: due to competitive pressures there’s little latitude to keep chipping away at their grids.

Advisor recruiting is becoming more of a frenetic struggle, not less. In addition to the already established players, there are now a host of boutique firms that are poaching $2 million-plus wirehouse teams. Independence is no longer a bold, trailblazing option but a familiar, accessible choice toward which more advisors are gravitating.

Major wirehouses have already slashed their grids in recent years. Morgan Stanley and UBS chopped payouts in 2020 by 10% and 20%, respectively. Back in 2019, Merrill Lynch withheld payment on the first 3% of its monthly grid. Wells Fargo did raise its monthly hurdle for 2021 — but it had left its grid untouched since 2014.

Just a few years ago, and with great fanfare, wirehouses like UBS and Morgan Stanley withdrew from the broker protocol, declaring that they were renewing their focus on providing resources to their existing salesforce, and so didn’t really need to hire advisors from rival firms.

Now, both of these wirehouses are aggressively back in the hiring game. They know that substandard grids could torpedo their recruiting efforts.

That’s why the lion’s share of tweaks to firm payout schedules in the future will not be cuts to their grids but rather more rewards and punishments designed to shape advisor behavior.

House rules
Wirehouses want their advisors to be focused on broad-based, holistic wealth management. They want advisors whose clients have significant levels of assets. That means incentivizing more growth in new, truly high-net-worth households. It also means boosting gross production and doing more financial planning and lending.

The top 20 more than doubled the gains of their fixed-income industry peers.
January 6

To that end, wirehouses are shelling out big bucks for technology upgrades to provide a competitive advantage to their advisors. The race is especially pronounced when it comes to utilizing artificial intelligence to enable advisors to more easily deliver customized solutions for clients. This client-centric, data-driven approach fits beautifully with Wall Street’s client-first mindset.

It’s a far cry from the product marketing campaigns of yesteryear.

The bottom line: Firms making mammoth investments in their technology and platforms will continue to insist that their advisors run their practices according to the business models that they value.

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