In recent years, there's been a bevy of popular films and TV series offering dark visions of a future world. "The Handmaid's Tale," "The Hunger Games" and "Fahrenheit 451" all portray future societies characterized by rampant poverty and totalitarian oppression.

There's a dystopian prophecy making the rounds among wirehouse advisors as well.

It goes like this.

The age of entrepreneurialism is about to end for financial advisors. Or, as Wall Street likes to say: no more eat-what-you-kill. Instead enter the advisor zombie, a client service representative who gets a salary plus bonus.

It’s always a slippery slope to change. I had a lengthy chat with Dennis Gallant, industry expert and president at GDC Research about what could happen next.

In this dystopian version of events, the slide begins with Morgan Stanley and UBS, both of which announced in late 2017 that they would no longer participate in the Broker Protocol. Advisors can no longer lay claim to their book. They leave the firm, they leave their books.

Wirehouses are locking in their advisors, so that they can slash their compensation and limit their upside earnings potential. Advisors will never make the kind of money that they've made before once they lose their ability to control their earnings. It's only a matter of time before Merrill Lynch and Wells Fargo exit the recruiting protocol as well, according to this narrative.

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“You can raise a lot of money without paying a dime to hire superstar advisors.”

This potential strategy seems to ring true with many UBS advisors who note that the private banking side of UBS with its salaried-plus-bonus employees is more profitable than the commission-based advisors at UBS USA.

I don't know whether this grim scenario will necessarily come to pass. It is worth asking the question, though: If wirehouses decided to adopt a salary-plus-bonus compensation model, how would they do it?

Mark Elzweig
John Calabrese

I'm sure that it hasn't escaped the notice of wirehouse executives that Vanguard's Personal Advisor Services platform now has $100 billion in AUM since its May 2015 rollout. I don't think that they aspire to offer primarily robo advice, but the takeaway is clear: You can raise a lot of money without paying a dime to hire superstar advisors. An advisor salesforce offering a largely standardized service that is reinforced by powerful firm branding can create a culture in which investors are loyal to the house, and not especially tethered to their advisor. From the vantage point of wirehouse senior management that's something to really admire.

“Given Vanguard’s success, it would not be surprising to see firms emulate key aspects of their advice model,” Gallant says.

Wirehouses wishing to go this route would likely hire newly minted CFP's with a few years’ experience and pair them up with older advisors who are approaching retirement. The newbies mandate would be to cultivate the spouses and children of clients, who are often ignored by advisors. This would solve a big problem for Wall Street firms. Studies show that when wealth is transferred to the next generation, the kids generally switch advisors. According to a recent Deloitte report, some $30 trillion in assets are in play as baby boomers transfer their assets to their Generation X and millennial family members over the next few decades.

In addition to financial planning services, the new advisors would offer clients a menu of home-office-run UMA's and banking services. Older advisors would be strongly incentivized — if not required — to transition assets to these new clones rather than to younger, more entrepreneurial advisors. The homegrown advisors wouldn’t receive commissions but bonuses tied to client service and other metrics.

“Developing a more scripted and salaried advisor base would shift the wirehouses from a sales to a service culture,” Gallant says.

Wirehouses have plenty of experience training and managing call center advisors who are akin to bank brokers in that they offer a prescribed investment program. They know how to get this done. An investment offering that is as homogenous as possible is much more bulletproof from a compliance standpoint. There are less moving parts to oversee.

Wirehouses would have two parallel advisor career tracks.

The older generation of entrepreneurial advisors whose average age is late 50s would be allowed to continue with their existing business model. Rather than attempt to teach old dogs new tricks, firms would focus on waiting for them to retire and then transition their assets to the younger, more malleable homegrown advisors. The newbies would focus on executing the firm’s investment program and "managing up" so that their superiors would recommend them for the biggest bonuses.

The question will be: Which model better serves investors? The entrepreneurial advisor of old who collects fees and/or commissions? Or, the salary-plus-bonus corporate employee who follows a program? I’d put my bet on the entrepreneur.