Recruiting 2018
15 recruiting trends to watch next year
The job market was tumultuous for financial planners this year, and now the career plans of thousands of advisors (and the billions of dollars they manage) hang in the balance as 2018 approaches.

To say the least, 2017 was eventful when it comes to recruiting advisors. The Broker Protocol began to unravel, and the Department of Labor’s fiduciary rule was partially implemented. Plenty of questions loom over both these issues in 2018.

Meanwhile, a massive acquisition may cement a new leading firm’s headcount atop all others’ next year, while the changes in another part of the industry could also upset the traditional balance of power between regional firms and wirehouses.

For a detailed listing of recent hires, check the latest edition of Advisors on the Move. For a full analysis of recruiting trends to watch in the new year, please click through our slideshow.

Additional reporting by Lee Conrad, Charles Paikert, Ann Marsh and Andrew Welsch
National Planning Holdings advisor headcount
1. LPL’s massive acquisition touches off a recruiting fight
LPL Financial’s purchase of the assets of National Planning Holdings’ four broker-dealers will shape the IBD space for years to come.

The deal could push LPL’s headcount above each of the four wirehouses, but it has also cleared the way for rivals to the No. 1 IBD to make inroads among the group of 3,200 advisors. Other firms have added at least 274 advisors with $11.5 billion in clients assets from NPH since the Aug. 15 acquisition.

LPL has planned the transition of NPH’s assets and advisors to its platform in two waves, with the first one slated for early next month and the second scheduled for February. Meanwhile, at least one of the firm’s competitors, Commonwealth Financial Network, has predicted record recruiting results for the year.

To read more, click here.
OWS_11_21_2017 AUM for new recruits by channel as of November 2017
2. Will the Broker Protocol collapse in 2018?
Morgan Stanley and UBS are out of the Broker Protocol. Those two firms represent more than 22,000 brokers. And industry insiders expect the other two wirehouses, Wells Fargo Advisors and Merrill Lynch, will follow Morgan Stanley’s lead, dooming the protocol to collapse.

"My personal prediction is that protocol will unravel,” Stifel CEO Ron Kruszewski said following Morgan Stanley’s exit. “The largest firms brought it [into existence], and the largest firms will take it out.”
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Advisor fee survey results
3. Will the fiduciary disruption spill into 2018?
President Trump’s administration has pushed back full implementation of the fiduciary rule, but it’s already roiled firms’ recruiting.

Morgan Stanley attributed a flat headcount in the first quarter of 2017 to guidance from the Department of Labor suggesting recruiting deals create conflicts of interest. Three of four wirehouses — Morgan Stanley, UBS and Merrill Lynch — subsequently announced cutbacks to their traditional broker recruiting efforts.

In the IBD space, LPL CEO Dan Arnold called the DoL rule the “biggest driver” behind the firm’s thinning headcount in the second quarter of the year. Part of the rule went into effect June 9, but the administration delayed the full rule until mid-2019 as it examines possible changes to the rule.

Firms in all parts of the industry have already made costly changes to their compliance processes and commission policies, even as they publicly slammed the rule. Next year — just like this year — uncertainty surrounding the rule will remain a key factor in the movement of advisors and assets.

To read more, click here.
Wells Fargo recruiting
4. Can Wells Fargo’s recruiting efforts overcome its scandal-plagued brand issues?
Wells Fargo has struggled to keep its advisor headcount up. Industry insiders say Wells Fargo’s advisor recruiting has suffered due to the scandals that have plagued the bank.

Though the firm reported in October that it snapped a three-quarter losing streak, adding 37 advisors to 14,564 from the previous period, its overall headcount was still down 3% compared to a year earlier.

The wirehouse’s ability to recruit aggressively will be complicated by the potential collapse of the Broker Protocol and stiff competition from regional brokerages, which are coming off a banner year for hiring.

To read more, click here.
Diversity of financial advisors in the United States Bureau of Labor Statistics September 2017
5. Will the industry’s diversity improve in 2018?
Advisors, firms and industry organizations have ramped up efforts to make the profession better reflect the diversity of the country and their client base. Less than a third of all advisors are women, and less than 6% are black, according to the U.S. Bureau of Labor Statistics.

The CFP Board and FPA combined resources under the Center for Financial Planning to try to bring more women and people of color into the fold. Companies such as Edward Jones have launched their own programs, and individual advisors are stepping up to act as mentors for new and prospective advisors.

The longstanding lack of diversity in wealth management is a “grave” threat, Pershing Advisor Solutions CEO Mark Tibergien said in a speech at NAPFA’s spring conference.

“Our talent doesn’t reflect the face of our community, nor does it reflect what I think is important for the continuation of the independent financial advisor movement to address as a crisis,” Tibergien said.

To read more, click here.
Succession Planning Webinar Poll Results_07/13/17
6. Will RIAs meet the succession challenge?
In 2018, expect to hear more about smart RIAs using succession planning — including equity stakes for new hires — as a central tool in their recruiting game plans.

Many firms are finding that the quality of hires they attract depends on whether or not they have a succession plan in place, and on the quality of that plan.

On the other side of the same coin, subpar hires can suppress a firm's value and dim its succession prospects decades down the line.

To read more, click here.
U.S. Bank signage
Signage is displayed on the exterior of a U.S. Bank branch in Provo, Utah, U.S., on Tuesday, July 14, 2009. U.S. Bancorp, parent company of U.S. Bank, will report second quarter results on July 22. Photographer: George Frey/Bloomberg
7. A missing component in the bank channel
While RIA owners can sell their practices or their books of business, and wirehouse advisors can bring in junior partners and still get a cut of revenue even after they retire, the same types of arrangements are largely unavailable for bank advisors.

There are a few exceptions. U.S. Bank launched a succession plan that it uses as part of its recruiting efforts. And other smaller institutions have formed ad-hoc plan for aging advisors.

But as a group, the bank channel still lags in this respect.

To read more, click here.
CEO survey
8. How tech will help recruiting while reducing the number of advisors
Almost two thirds of C-suite executives predict advisor headcounts to fall in the next five years, even as their firms tout innovations they hope will help win over new brokers by making their jobs easier. Rapidly expanding technology tools such as robo advice will divide firms into winners and losers next year.

The number of advisors has dropped to roughly 301,000, down 11% from its peak in 2005, according to research firm Tiburon Strategic Advisors, which polled the CEOs and other managers in January. Experts and executives alike predict digital tools will allow each individual advisor to take on more clients.

Firms like Morgan Stanley and Cetera Financial Group have unveiled such innovations, including Cetera’s facial recognition software and Morgan’s embrace of artificial intelligence. Other companies have also started partnerships with Amazon to marshal Alexa for advisors or are exploring ways of doing so.

To read more, click here.
Schwab Advisor Services RIA chart
9. Which breakaway brokers will the platforms add next?
Dynasty Financial Partners and HighTower Advisors continue to be the preeminent platforms for breakaway brokers going independent.

HighTower's $100 million cash infusion from Thomas H. Lee Partners and Dynasty's additional service offerings guarantee that wirehouse brokers will continue to be tempted to jump ship in 2018.

To read more, click here.
LPL advisory assets
10. Can IBDs win and retain breakaway RIA advisors?
With the independent RIA channel growing steadily each year, IBDs are racing to keep up.

Major IBD players like LPL and Cetera are betting that tech and compliance support will help them retain so-called hybrid advisors, according to Cerulli Associates. Firms like Raymond James, Ameriprise and Wells Fargo also offer independent alternatives to full RIA status.

LPL recently unveiled a new policy for next year requiring incoming advisors to have at least $50 million in advisory assets to launch an RIA or join an existing one on the firm’s hybrid platform. The firm will also cut fees for its corporate platform next year, executives announced in a memo last month to advisors.

“These changes make the administrative and compliance services LPL provides through our corporate RIA platform more valuable than ever,” LPL Managing Director for National Sales and Consulting Andy Kalbaugh told advisors.

To read more, click here.
Raymond James third quarter 2017 earnings report
11. Coming off a banner year for recruiting, can the regional BDs keep up the momentum in 2018?
Regional brokerage firms have been on a recruiting tear this year.

RBC said it hired more advisors in the first half of 2017 than in all of 2016. Janney Montgomery Scott, Raymond James and others have also notched impressive recruiting hauls.

While advisor moves to regionals hit new highs this year, the factors driving that momentum are not likely to dissipate any time soon.

“Regional firms have become very attractive places for advisors,” says headhunter Mark Elzweig. “Their environments are smaller and more flexible. And most every wirehouse advisor knows someone at a regional firm that is happy.”

To read more, click here.
12. How will the industry leverage college planning programs?
Colleges large and small are training the next generation of planners, with many programs registering through the CFP Board and advisors stepping in to serve as professors.

The question remains whether the industry is doing enough to tap this incoming crop, however. Only a third of RIAs hire interns for the summer or other parts of the year, according to a TD Ameritrade study. Advisors’ advanced average age and a dearth of succession plans make internship programs critical.

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Advisors say the number one reason they don’t have a succession plan in place is that they haven’t identified a strong partner yet.
13. What will be the next IBD consolidation?
More IBDs are merging amid regulatory and revenue pressure.

Advisor Group’s Royal Alliance Associates ushered in a new super office of supervisory jurisdiction earlier this year through the network’s new matchmaking service [see screenshot above] for practices in need of a succession plan. Two LPL super OSJs also combined into one, and Cetera folded one of its seven IBDs into its largest.

Both firms also grew this year through acquisitions of outside IBDs, as did the private equity-backed Kestra Financial. Industry observers will be watching closely in 2018 for the next big deal in the space bifurcating between giant firms and boutiques.

To read more, click here.
M&A Average AUM per deal rising '13-'17 1017.png
14. Which way will RIA M&A deal flow go?
Attracting and retaining top talent is one of the most formidable challenges facing RIAs. Adding advisors through M&A deals continues to be a time-tested solution to the problem.

"Acquisitions allow me to partner with top advisor talent and hire more qualified people because now I have greater resources," says Brent Brodeski, CEO of Rockford, Ill.-based Savant Capital Management. "For the same amount of time and energy that it takes to open a new office, I come out ahead if I buy one."

It should come as no surprise then, that 2017 is on track to set a new record in RIA transactions, with no signs of a letdown in 2018.

To read more, click here.
TPM chart
15. Musical chairs in the bank channel
The broker-dealers that serve as the backbone of the bank channel (the third-party marketers) have been cherry-picking bank customers from each other for years without breaking much new ground and increasing their business.

And that’s not likely to stop anytime soon. To be sure, the TPMs also spent a number of years on a consolidation spree, but two industry consultants say that pathway to growth probably came to an end with Ameriprise’s acquisition of IPI this year.

To read more, click here.