Five Questions for a Top Recruiter

A conversation about wirehouse recruiting packages and financial advisor compensation with Rick Peterson, president of Rick Peterson & Associates, a national executive-recruiting firm based in Houston.

What’s your view of today’s recruiting environment vs. a year ago?

It’s a whole different ball game out there.

The environment has changed dramatically with far less movement right now vs. all the movement of a year or so ago, when there was “the perfect storm” for movement.

Can you explain the change?

The biggest reason for this change is that so many people have already moved and there are so many handcuffs being put on advisors right now that it’s become a bit more difficult to move.

Nearly everyone is part of some kind of deal, either a retention package or a recruiting package.

Thus, even though recruiting deals are at all-time highs, advisors have to weigh carefully what they will give up if they leave.

What about the view of some wirehouse executives that the heyday of breakaway brokers is over?

No, this won’t change, and I’ve been doing this for 25 years.

Brokers leave for lots of reasons, including financial ones. But they also leave because they don’t like the firm or the people they work with, their manager, their location, their payout —all sorts of reasons.

In the brokerage industry, like in other sales industries, brokers can leave whenever they want to. This is different from some other industries, in which -- with the unemployment rate today -- there’s less of an ability for some individuals to move when they want to.

So the firms have to treat advisors with kid gloves as the honored employees that they are. Without advisors, nothing happens.

What size recruiting deals are you seeing today?

Some are at 350 percent, up-front and back-end bonuses, and some are even higher than that.

The highest upfront bonus we’ve heard about is 150 percent.

Which firms are offering such recruiting packages?

The largest deals are from Morgan Stanley, Merrill Lynch and UBS, which are all above 300 percent.

UBS ramped up its deals pretty dramatically after some significant losses of advisors. Some of their managers are even saying that no deal is necessarily absurd, bring it to us and we will look at it.

You have to maintain headcount and revenue. This is true for recruiting and for morale. You have to continue to grow: If you’re not growing as a firm you’re coasting, and then there’s only one way to coast.

What kind of decision-making do advisors make when considering a move?

Advisors are offered deals based on their sales, assets and length of service —and that is what makes a new recruiting deal, not how much time or money is left on an advisor’s retention contract and bonus.

For an advisor, they have to say, “Here is what I will get at a new firm, upfront, and here’s what I have to pay back, since I’ve already received this amount through my existing retention package.”

When brokers weigh whether or not to move, there’s always a push factor, usually they don’t like where they are, and the pull factors include the deal. If the push factor is strong enough, then the pull factor doesn’t have to be as compelling.

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