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
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.
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.
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.” To read more, click here.
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.
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.
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.
“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.
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.
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.
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.
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.”
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.
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.