Last year wasn’t just a banner year for the stock market, it was also a ripping time for financial advisors: Whether they stayed put or changed firms, brokers received a record amount of money. The trend continues in 2010.
An intensely competitive market for advisors prompted three of the four surviving wirehouses to offer retention awards packages to thwart an exodus to competitors, and the payments were generous.
Advisors bringing in $500,000 in commissions were offered 30% upfront money. At $1 million dollars in gross revenues, the upfront payment jumped to as much as 75%. Plus, firms have been offering backend awards for growth to everyone. We’re talking a significant amount of money.
As you would expect, the chieftains running the new joint venture at Morgan Stanley and Smith Barney were extending retention packages. Ditto Bank of America/Merrill Lynch. Only Wells Fargo refrained from offering its Wachovia unit retention incentives, although it just revamped its deferred comp to create incentives to raise more assets.
UBS also joined the retention-paying party – the first time in my 25 years as a recruiter that I saw a firm wooing its brokers when there wasn’t even a whiff of a merger in the air. But last year, it got a big black eye when it agreed to pay $780 million in fines for hiding offshore accounts of wealthy Americans – as well as to turn over the names of 4,500 tax-evading Richie Riches to the IRS. During that time the advisor headcount shrank to 7,000 from 8,000.
As we’ve written before, broker demographics continue to feed the demand for successful advisors. Despite the fact that wirehouse land has shrunk down to just a handful of major firms, there are an expanding array of choices for top advisors in the regional broker and independent/RIA channels. The market crash caused many advisors nearing retirement to leave the industry early and vaporized advisors with weaker practices.
The happy result: deals for high-end advisors have skyrocketed to record levels – more than 300% packages for those who can increase assets under management and meet backend targets.