From the July 2009 issue of Boomer Market Advisor • Subscribe!

Best year ever

More advisors than ever are going independent and recruiters have their pick of the talent pool. Find out what they're looking for - and why this could be their BEST YEAR EVER.

The financial situation is well documented. The twin B's that are so much a part of the lexicon today - bankruptcy and bailout - were unthinkable when times were flush. Most of the talk today is about the auto industry, but the travails of the financial industry are no secret. The climate created by AIG, Bear Stearns, Lehman Bros. and many others in the grab bag of seemingly impervious financial giants has left advisors and brokers wondering what the industry will look like in a couple of years - and where they are going to hang their shingle.

But has the chaos in the wirehouse arena created opportunity elsewhere, say in the broker/dealer space? Is the recruiting environment different now than it was a year or two ago? The recruiters in the trenches seem to think so.

Bill Morrissey, executive vice president, branch development, LPL Financial Services, San Diego, says the influx of advisors looking for broker/dealer homes is coming from across all channels - banks, insurance companies, wirehouses and other broker/dealers.

"You've got more advisors exploring independence than ever before," Morrissey says. "Many are considering independence for the first time. Those who are already with a broker/dealer are seeing the importance of scale."

Julie LeClere, director of recruiting for Des Moines, Iowa-based Princor Financial Services Corp., says the environment for recruiting has changed dramatically, as a greater number of advisors are looking to change of their own volition or because of changes at their current firm.

"For example," LeClere says, "some firms are lowering payouts or letting reps go who are below a certain level of gross dealer concession. In addition, the uncertainty surrounding mergers is causing more advisors to look at other firms."

For some recruiters, the difference is measurable. "If you look at 2007 and 2008, those were our second- and third-best years ever," says Gregg Johnson, senior vice president of branch office development and acquisitions, Securities America, Omaha, Neb. "And they were the best [combined] two-year period. In '09, we're on pace for the best year ever."

Kyle Selberg concurs. The senior vice president of business development for Cambridge Investment Research in Fairfield, Iowa, Selberg says new leads are up 30 percent, the number of reps sending e-mails from the company Web site is up 33 percent, general inquiries are up 70 percent and home office visits are up a whopping 130 percent. (Not bad for a company in the middle of nowhere.)

So it's clear the environment has changed. More advisors are looking, though they are "taking their time even if they are moving," Selberg says. "They are doing their homework," ensuring they're not moving from one deteriorating situation to another. Many of those advisors are going to decide that independence is the right path, which means broker/dealers are going to be able to select from among a crop of solid professionals.

Okay, so the selection is greater than maybe ever before. Does that mean more advisors are going to find homes with broker/dealers? Probably. Does it mean broker/dealers are going to look at this as a time to add as many advisors to their roster as they can? Not so fast on that one.

Among sources for this story, the consensus seems to point toward a measured look at that big talent pool, not a full-fledged - and rushed - snapping up of talent.

"We can be more selective," Johnson says, knowing that there are many more advisors out there who meet the company's standards.

One thing both Johnson and Selberg made clear - and that others would no doubt agree with - is that the due diligence broker/dealers engage in is not going to slacken for the sake of adding more advisors. That's not a winning formula for the broker/dealer, for the advisor or for clients. So they will continue looking closely at every advisor they consider. It's just a bonus during these times that "we have many more reps who fit our selection criteria," Selberg says. What it all adds up to in the long run is a stronger planning environment for consumers.

"Any time a firm is able to increase the quality of its advisors, it benefits the firm with more sales from an experienced advisor - more AUM - and ultimately, the client, who benefits from working with a more experienced advisor," LeClere says.

Something else that should catch the eye of any advisor is also driving the move to independence: consumers.

"What's unique today," Morrissey says, "is that many advisors are coming out of employer firms because clients are demanding it."

So add consumer pressure to the list of reasons the talent pool is growing.

It's clear that broker/dealers are happy to have a bigger selection of advisors. And it's clear they're still going to be looking for the top-quality advisor they've always looked for. So what are those qualities that make candidates shine? How can you stand out from a large and growing crowd and convince the right recruiter that you're the right advisor?

A clean record is an obvious factor, but that's not all. The ability to offer a variety of products is a plus to recruiters. Advisors who are limited by a small product mix may find themselves on the outside looking in.

"We want advisors who can provide financial planning and have the ability to sell a wide array of products," LeClere says, "from mutual funds to annuities to risk-based products."

That fits with something Morrissey says is vital: the ability to take the long view. The demand for advice is only going to grow, Morrissey says, and advisors are going to be asked to supply more and more of that advice, and they're going to need to offer it in more and more areas.

Keep in mind that with the ability to be a little more selective, some broker/dealers are looking for more CFPs. Is that something worth pursuing at this time? Or should you look for a firm that isn't as stringent on that factor? Also, pay attention to the average production level of a given broker/dealer; it's a good bet that those looking to grow will be selective enough to find reps doing business well above their average. Is your production a good fit?

Something else recruiters talked about repeatedly - something they're not willing to fudge on to land even big producers - is the culture of a company. They are going to make sure that any advisor they add to the lineup fits the company culture. It would be a mistake for an advisor or a broker/dealer to ignore that fit.

LeClere says she looks for high integrity and a good cultural fit. Integrity alone isn't enough to seal the deal.

Selberg sees the value of finding the right cultural fit perhaps better than most, given Cambridge's location. "When it comes to culture," he says, "if a rep values being flown to the East or West coast, maybe being taken on a cruise, we're not going to be a good fit." Iowa is flyover country, and Fairfield isn't on either of the interstates that cut the state into quarters.

Another mistake advisors can make in the quality department is worrying too much about payouts, ticket charges and other financial considerations before getting to know a company and its people and culture. That has always been a turnoff for recruiters; now, when they have their pick of a much larger talent pool, embarking on the financial side of the conversation too early raises immediate - and perhaps insurmountable - red flags. That points to a "me first" attitude that recruiters can easily let walk out the door.

"Firms are turned off by advisors who are only focused on what's in it for them," LeClere says, adding that advisors who can exhibit a focus on how a change in firms will help their clients will appeal to more recruiters.

The qualities recruiters are looking for certainly aren't new. They're the qualities that make a good advisor a good advisor no matter the climate. The difference is the competition. More advisors. More good qualities to choose from.

"This is an environment not many, if any, have been a part of before," Johnson says. "Due diligence is critical. Clients are doing it on advisors. Reps should do it on their current broker/dealer to see if they have the strength to survive." And, by extension, advisors should conduct thorough due diligence on any firm they look to move to, because recruiters are going to be returning the favor.

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