Research: What’s your view of today’s recruiting market for advisors?

Michael King: The deals are going up again for good-quality brokers, which is a positive sign for the industry. This started about six months ago at Merrill Lynch, which was the only firm offering unusually attractive deals. And Morgan Stanley is now offering such deals also. And that means deals are really becoming more attractive.

What do today’s deals look like?

Some of the upfront offers are from 120 percent to 140 percent of trailing 12-month production in cash. When a deal is above 140 percent, an additional 20 percent is a cash bonus related to 70 percent of assets coming over.

This is very comparable to the pre-crisis levels. There were many cases back then of 150 percent and up, but what’s going on today is that the backend part of the deal is being increased based on production and/or assets coming over.

Now, the backend is increasing based on the movement of assets and production. Backend bonuses are also longer, and are offered every year for the first five years, vs. three years earlier. Again, this is very attractive.

The firms are putting more responsibility onto the brokers for them to achieve what they’ve said they are going to achieve. This is the current direction.

What’s been the movement of brokers in the past six months?
There really hasn’t been much movement since April.

Now, there’s a more viable, positive situation for brokers, since the deals have been raised. And at some firms, brokers have already gotten retention bonuses of 50 to 100 percent in place to encourage them to stay, from the acquiring companies (i.e., BofA and Morgan Stanley).

Today’s deals are in cash, not stock anymore, which is what brokers really want.

What do you expect for 2010?

The deals should stay high, and we’ll see UBS come out soon with something like the deals being offered by Merrill and Morgan Stanley.

As for lower producers, they can then go to smaller broker-dealers or independent broker-dealers. If they are in a major metropolitan area, there are usually some good smaller firms that they can go to. In New York, for instance, they have lots of choices.

Generally speaking, the wirehouses are not keeping producers with less than $400,000 in trailing 12-months sales and commissions, though Wells Fargo may be an exception to this.

What advice could you share about today’s recruiting market?

It’s always smart to check out the options. Look at their payouts, consider any special needs you might have and get to know the culture of other firms. And keep an eye on UBS; it could make some moves to become more competitive with its deals.