If 2009 was a year of unprecedented turmoil, 2010 is likely to be the year of calm. But that doesn’t mean it won’t be interesting for financial advisors.
The landscape, ripped up in the economic upheaval of the Great Recession, is astoundingly changed: Morgan Stanley and Smith Barney have joined at the hip; the raging bull at Merrill Lynch now gallops under the Bank of America banner; Wachovia and AG Edwards have gone to the arms of Wells Fargo.
But new competitors are lurking everywhere, wooing and winning over top talent. Just as Joseph Schumpeter predicted, the creative destruction inherent to capitalism is bringing about a new order. In 2010 top advisors will like the new order.
Survivorship has its privileges.
Creative destruction isn’t pretty to watch. The past year was a wild ride, punctuated by one extraordinary event after another.
This is the first time in 25 years of recruiting that every single firm on Wall Street had a monkey on its back. It’s not uncommon for firms to rise and fall in popularity for reasons both obvious and subtle. But we have never worked during a time when every single major Wall Street firm was struggling to protect their reputations in some way.
Many wirehouse advisors would say to us that their clients were worried about the very viability of their employers; they needed to change. Unprecedented – as was the number of advisors who switched firms.
Set aside the makeover of the wirehouse world as we once knew it – and the list of “unprecedented” continues. Go on to the dogfight for top-quartile advisors: Even as many Americans struggled to hang on to their homes and the stock market took some death defying turns, retail firms put together stratospheric offers to lure talent.
The offers, however, came with unprecedented conditions. Contracts stretched from seven years and ultimately to nine. The fine print changed too. A new generation of bigger than ever deals emerged – 300 percent packages for advisors who could boost their client assets by 50 percent over the term of the contract.
Amid all the turmoil, advisor popularity is easy to explain: The business proved more profitable than anyone imagined: Many predicted clients would leave in droves. That never happened. Instead they redistributed assets, re-thought strategies, but more or less, stayed true to their advisors.
By contrast, advisors have not been as loyal to their profession. Their ranks, shrinking for decades, withered during the Great Recession.