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Can't Get No...

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When it comes to making brokers happy, the work environment is the top “driver of satisfaction,” according to the third annual National Financial Broker and Advisor Sentiment Index, but it seems that a larger percentage of brokers aren’t feeling the love: the number of brokers surveyed who said it was “likely” that they would switch to another B/D rose to 9% in 2007 from 5% in 2006. The study, conducted by the third party research firm In4mation Insights on behalf of the clearing arm of Fidelity Investments, was based on online interviews conducted between August 31 and October 9, 2007 with 1,201 brokers and, new this year, RIAs across the country from independent B/Ds, wirehouses, and insurance, regional, and bank broker/dealers. In addition to the news of an increase in those brokers who were likely to switch firms, Sandra Metraux, the National Financial executive VP of marketing, noted that the three top drivers of broker satisfaction in the survey were their work environment–how they relate to their managers; the products they can sell; and the education level of their co-workers–clearing and settlement, and compensation. When those who had made a switch to a new firm were asked to list their top challenges after the change, finding new customers was tops, followed by managing the business, and adjusting to the new sales/marketing support structure. “It’s striking how high finding new customers (42%) was on the list,” Metraux says, suggesting she would have expected a higher number for practice management issues. But the finding also contained a nugget useful for the firms with which brokers affiliate. “B/Ds can help brokers determine the market they’re going after,” she adds.


Who was most likely to switch, and where did they expect to go? Based on Cerulli data, banks account for 6.5% of the brokers in the U.S. and insurance firms 14.7%, but those two channels are likely to experience outsized defections to other channels: 22% of the insurance brokers in the survey said they would likely switch, while 20% of the bank brokers in the sample said they would head to greener pastures. Nearly two-thirds of those likely to switch (62%) would prefer to move to another type of firm–the biggest expected destinations were independent B/Ds (38%), regional firms (16%), and RIAs (15% of the preferred channel for likely switchers).

What about those respondents who had switched affiliations within the prior 12 months? Their primary motivations, according to the survey, were: not happy with changes in their original firm’s direction; a desire for more independence and freedom; and better pay. Those were the same three reasons why brokers said they were likely to switch, but in a different order: for them, better pay was first, followed by the desire for more independence, and unhappiness with changes in a firm’s direction.

To Metraux, those findings suggest that B/D management should “maintain a positive work environment.”

As for the Sentiment Index itself, which is based on a scale of zero (the lowest) to 10, Metraux reports that it was little changed from 2006: the index stood at 7.5 in 2007 compared to 7.7 in 2006. Since this was the first year that brokers with their own RIAs were included in the survey, those brokers’ feelings were not included in the Index itself.


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