Research: What's your view of the recruiting market in 2009 year to date?
Danny Sarch, president of Leitner Sarch Consulants: It's really a story of two different years. The first half of 2009 was as frantic a recruiting environment, coming out of 2008, as any I've ever seen in 25 years of doing this.
That came because of all the turmoil at the major firms (Merrill Lynch, Morgan Stanley, Smith Barney, Wells Fargo/Wachovia and UBS), which all went through what I call a "weekend of death" in 2008, and after that I'd say it was irresponsible for an advisor not to interview.
The second half of 2009 has been slower. Part of that is people taking a deep breath. And compared to how frantic things were before, now the markets are getting better, and advisors want to take care of their clients. Another part of this is the fact that firms are retrenching and figuring out what their strategies are going forward.
How many advisors still looking to switch firms?
If you were a wirehouse advisor last year and you didn't consider where else you might go, I think you were irresponsible to your own clients and to your own career. Now, we are getting back to normal, and the wirehouse firms have stabilized.
In general, advisors are re-evaluating things. Their old firms are essentially new, in terms of management and ownership. Advisors are taking a pause to evaluate these firms and what their stories are.
Still, advisors are looking at the other big firms to see what they are becoming, and, at the same time, wirehouse advisors are more open to what I'd call "alternative solutions" than ever before, such as smaller firms, independent and roll-up firms.
How are recruiting deals looking?
Deals peaked at the beginning of the year. Then there was some oversupply with everyone interviewing, and that created a dip for the first time in a long time. But then there was a lack of advisors interviewing and a recruiting pause, so now the deals are coming back.
Firms want to induce big advisors to leave. And these advisors have pretty aggressive retention packages; so if you want to get them to leave, you have to make an attractive offer. Thus, deals are going up again.
With reputable firms, the upfront deals are still aggressive at 100 percent of production (fees and commissions) or better. At the backend, that could hit 250 percent or even better.
Considering that the deals were very aggressive in 2009 based on old number, firms are also interested in seeing that advisors bet more of themselves. This means more of the deals are back-end loaded than before.
When you deliver assets, at the wirehouses, the deals can last from the first year up to nine years.
Is there any special advice that you would give advisors who are looking to move?
First, you need to establish a baseline. If you're considering a "alternative solution," like the smaller and independent firms, have you explored the platform sufficiently in order to hold and satisfy existing clients? And can you do business the way you are used to doing business at your existing legacy firm?
What are the advantages to you and to your clients? If you can't articulate answers to these questions sufficiently , then you probably shouldn't move.
It's pretty easy to evaluate the independent firms, for instance, as long as you take the time. They lay out all their cards in terms of the costs and how easy it is to make the transition to their platforms. It is do-able.
What do you expect for recruiting in 2010?
Next year should be a start-up of the recruiting wars again. The major firms still want to grow. And the best way to grow has been proven to be through recruiting.
They do this in a retaliatory fashion, because they don't want advisors to leave. And they do this in order to maintain a growing franchise. Plus, because the alternative platforms or solutions are booming, they need to constantly re-prove themselves in terms of why advisors should stay with them. The best way to do this is to convince some advisors on the alternative sides and with competing firms to join them.
I expect recruiting in 2010 to be as competitive as ever.