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Industry Spotlight > Broker Dealers

Five Questions for a Top Recruiter

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What is your view of the recruiting environment of the past six to nine months?

Overall, the fall in the market dramatically affected brokerages. It made the atmosphere very fertile from a recruiting perspective. The wholesale upheaval in the U.S. brokerage firms, in terms of management turmoil, mergers and acquisitions and more, was the “perfect storm.”

But brokers looking to move had skittish clients. So when they moved, they had far less assets and fewer clients coming over with them than in better times.

And how is it in 2009?

This year, things have stabilized somewhat, though there’s still management turmoil and enormous consolidation in the entire industry.

The big firms are in the process of merging, closing and streamlining branch offices. And a lot of brokers don’t know if their offices are going to be closed or not, so that creates angst.

Trailing-12-month production, however, has stabilized.

Are many financial advisors looking to switch firms?

Brokers are still considering moves, as their incomes have suffered and there’s plenty of new management and new ownership of their firms. Plus, there have also been legal troubles affecting firms, which can lead to morale issues, too. Furthermore, there are issues about changes in the field management at some firms, as news leadership comes on board and other corporate issues get resolved.

All this change affects things like paychecks, which means brokers get more interested in making a move.

They want to go where they perceive they’ll have a better environment for both them and their clients, at independent firms or at rival national-wirehouse firms.

What are deals like today?

Deals have shot back up and are very competitive again, which is getting brokers’ attention.

The deals came down in February, but that led to slower movement. So, deals then reversed and came back up, and movement has too.

Upfront payouts for brokers switching firms are at 140 to 150 percent of trailing-12-months production [sales, commissions and fees], and there’s a 100 percent offered at the backend.

This is very competitive and very compelling.

Also, the regional firms are getting very aggressive, since they see the recruiting opportunities as very fertile at the major firms. In addition, smaller firms are starting up all over the country as dissatisfied brokers look to open up their own broker-dealers as small, regional boutiques.

What advice do you give advisors looking to move?

Brokers should certainly have an exit plan. And brokers should carefully list what their options are.

Many brokers think their options are restricted to the firms, managers and offices they’re stuck with at the present time. Our job is to point out to them that there are many opportunities available at competiting firms.

There have to be push factors at the dissatisfied brokers’ existing firms, and sizeable financial incentives as a pull factor at the recruiting firms. Both these factors still exist today.


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