February 8, 2013

More Advisors on the Move in 2013: Diamond

Last year was average to down for advisor transitions, but 2013 is shaping up to be strong for recruitment

Recruitment momentum in the registered investment advisor (RIA) and regional space should jump higher in 2013 after a slow 2012, as advisors in search of independence are now sufficiently prepared to make a move, recruiter Diamond Consultants reported Wednesday.

Diamond predicts this year is likely to be a more robust recruiting year than last based on inbound calls and conversations with advisors, as well as deals closed in January and those now in progress.

While Diamond’s 2013 forecast is strong, 2012 was an average to down year for advisor transitions as fewer (but larger) advisors moved. The average trailing 12-months of deals executed by top recruiters was in the $2 million to $3 million range, up substantially from 2011, the Chester, N.J.-based recruiting firm reported.

Mindy Diamond“We observed that larger advisors—those with higher annual production and total assets under management—were exploring options and on the move to take advantage of the record-high transition packages being offered by wirehouses and because frustration levels amongst the longest tenured advisors at these firms have increased substantially,” said Mindy Diamond (left), president and CEO, in a statement.

Diamond Consultants has reviewed financial advisors on the move based on its proprietary annual data aggregation every year since the firm’s founding in 1998.

Last year, the firm found that movement to the bank channel remained “significantly” down. Overall, Diamond’s data confirmed that 2012 was lackluster for advisor recruitment due to:

  • Still “unforgiven” wirehouse retention packages for quality advisors
  • A perceived “sameness” among the wirehouse firms
  • Significantly stronger interest in independence, which requires a longer due diligence process, fueled by top advisors looking for greater control and freedom
  • Regulatory uncertainty

“We placed nearly the same number of advisors with wirehouses as we did with independent broker-dealers in 2012, accounting for the majority of our deals,” Mindy Diamond said. “The most interesting data point for us, however, was that larger advisors and teams turned to us for counsel than the year before.”

Regional firm deals ranged between 25% and 60% less than wirehouse deals. Independent firms offered anywhere from no transition money to 100% cash up front, and packages about a third smaller than wirehouse deals, at what Diamond Consultants calls “quasi-independent” firms such as HighTower Advisors.

“Advisors tend to do due diligence in several channels before making a move, and don’t choose independence for a short-term payday, rather taking the long view,” Diamond said.

As for the significantly downward movement to the bank channel, “the bloom is off that rose,” Diamond asserted. “For years, advisors found the greatest appeal in this space to be the cross-selling opportunities between bank and brokerage, but the majority of advisors today feel that the opportunity to cross sell is more of a myth than a reality.”

Uncertainty surrounding the regulatory environment and what FINRA has in store for advisors in 2013 with regard to broker disclosure of transition packages to clients was another reason for the slower pace of movement in 2012 as the majority of advisors took a wait-and-see stance.

Read Angie Herbers’ Best Way to Recruit Young Advisors: Teach a Class at AdvisorOne.com.

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