“These days, it pays for wealth advisors to look at the fine print closely before signing on the dotted line,” argues Sanctuary Wealth Services in a recent report on recruiting. “While wirehouses and commercial banks are promising bigger and bigger recruiting checks to lure advisors, it’s unlikely that advisors will ever see all of the promised bounty.”

According to Sanctuary, this is because the economics of advisor recruiting checks, which are structured as forgivable loans to advisors, have changed dramatically since the financial crisis.

In the past, advisors were offered six- and even seven-figure recruiting checks as incentives to change firms every five years or so; these checks often totaled 100 percent to 150 percent of an advisor’s trailing 12-month fees and commissions. And, in the past few years, these figures rose between 180 percent and 350 percent. Now, however, the industry is facing profitability constraints and has attached “daunting conditions” to most recruiting offers, the group says.

Plus, the upfront cash has gone down. Sanctuary’s report cites the views of Carol Hartman, a partner with the executive search firm Caldwell Partners, who notes, “The deals are longer and more complex. It’s not just AUM or commissions that are measured. It is both. Brokers not only have to hit their current production numbers, but also exceed them by a big percentage.”

The tough conditions on these deals stem from a number of factors, according to Sanctuary. These include ongoing pressure on investment-management fees, the negative effect of low interest rates on money-market balances, investors’ shunning away from margin accounts and rising recruiting expenses. “At some firms, the cost of bringing new advisors on board is growing by 20 percentage points in 2010 to more than 60 percent of anemic revenues,” the report explains.

The group says that over the past 20 years, industry payouts have dropped from about 40-45 percent in 1990 to roughly 30-35 percent today. Sanctuary expects this trend may continue for some time. Still, broker-dealers have to attract more advisors and thus are boosting checks but with “far more stringent conditions.”

In the past, firms would offer as much as 100 percent of a loan’s value up front, the upfront portion has been trimmed to 50-60 percent in recent years. At the same time, the forgivable loan term has grown from five years to as long as nine years.

In addition, to receive the back-end, advisors are being asked to grow their business at very aggressive rates. “The net effect is that the probability of advisors being able to earn the entire back-end of the recruiting check has declined markedly,” the report explains. “While the majority of advisors who elected to take the check in the 1990s and 2000s were successful in recouping the back end, Sanctuary’s research indicates that only 10 percent of [today’s] advisors will actually earn the entire back-end.”

With the back-end portion of the check now more difficult to achieve, the option of going independent is becoming “more and more like a better alternative,” argues Sanctuary. “That’s particularly true in a progressively more hostile work environment and during a period where the advisor’s individual tax rates are widely expected to increase.”

Breakaway advisors can earn payouts of 55-65 percent or more of their revenues in the independent channel, says the group. And while independence may not be for everyone, for some, the recruiting checks offered by large firms “increasingly looks like a mirage.”