From the January 2014 issue of Investment Advisor • Subscribe!

December 23, 2013

Why Reps Stay; Why Reps Leave

Sidebar to "The Waiter Test: Recruiting Tips from Commonwealth's Bloom"

In the latest of a series of reports on what the world will look like in the future for advisors and the companies with which they partner, Pershing released in early December “Broker-Dealer of the Future II,” in which it delineates six “stunning transformations” that it says BDs must experience if they wish to be successful in the future.

Based on research conducted by FA Insight of advisors and six broker-dealer executives, one of the most interesting findings related to the main reasons why reps stay at a broker-dealer and what influences them to depart. There are five key areas where the study says BDs can “best add value outside of solely competing on price” when it comes to rep retention and recruiting.

  • Independence, a term advisors use to “describe their ability to control their businesses and serve clients in an objective manner.”

  • Culture, which advisors define as sharing a set of values and goals that will help them grow their businesses, but also provides them with a sense of belonging.

  • Brand, which expresses the reputation of the BD in the client marketplace and within the professional community.

  • Passive Recruits, which the report defines as those reps who join a broker-dealer as a group, not as individuals, often as a result of a merger or acquisition.

  • Economics, which includes payouts but also the totality of fees, costs and compensation for affiliating with a specific broker-dealer.

Looked at in another way, however, these topics were given different weights when surveyed advisors were asked which factors were most important to them in deciding to either join a new BD or stay at an existing BD. Independence and brand both received 30% responses when advisors were considering joining a new BD; for those remaining at an existing BD, culture was most important, at 32%, while service and support was the second leading factor in staying, cited by 28% of respondents.

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