The latest in Pershing LLC’s series of studies on the state of the advisor industry has found that human capital remains a thorny problem for independent broker-dealers, with the average age of BD reps continuing to increase while attrition from BDs is growing.

The independent study released Tuesday by Pershing, called The Race For Top Talent II, was conducted by FA Insight, the advisor-centric research firm whose principals are Dan Inveen and Eliza DePardo, and follows a 2007 report on the same topic that was called The Race for Top Talent.

In fact, one of the conclusions of the study is that in a shrinking BD universe—since 2003, the BD industry has annually lost an average of more than 100 firms per year, according to the study—broker-dealers must “evolve their recruitment, development and retention practices or risk being left behind.” Good recruiting alone is not sufficient, the report argues, saying that “without equal emphasis on professional retention and development, broker-dealers will never enjoy sustainable success.”

Inveen (left), director of research at FA Insight, said in the statement accompanying the report that the market for “talented” reps will “become even more competitive as demand exceeds supply.”

Part of Pershing’s TalentConnect program that is designed to help BDs find, retain and develop new representatives (or “investment professionals,” as the report calls them), the new research found that:

  • The number of reps—310,000—is “largely unchanged over the last few years,” while the percentage ofinvestment professionals over 55 years of age increased from 32% in 2007 to 36% in 2009.  However, independent BDs have “pruned” lower producers: the percentage of those reps with less than $50,000 in production dropped from 55% in 2005 to 42% in 2009.
  • Only 2% of “brokerage-affiliated investment professionals” with $50,000 or more in GDC would “target a wirehouse when changing firms,” while 47% expressed a preference for an independent broker-dealer, and 22% would seek to join or start an RIA.
  • The report found that in 2009, 1.2 reps left the average independent broker-dealer for every new investment professional recruited. Of those reps surveyed, 12% said they are “likely” or “somewhat likely” to change their BD affiliation within the next three years, or some 11,600 BD reps looking to join a new firm each year
  • The top drivers for reps moving from one BD to another are independence, firm brand, and services and support, while the top drivers for staying at the same firm are services and support, culture and independence.  
  • The authors argue that BDs that develop programs to help new or less experienced reps advance their skills and that support the growth of their firms “provide a competitive retention advantage that directly contributes toward increased broker-dealer profitability.”

Advisors can receive a copy of the study by visiting or sending an e-mail request to

The report by FA Insight, which has much experience consulting with BD home-office personnel and individual representatives, was based partly on a telephone survey of 51 broker-dealer affiliated reps from across the range of possible affiliations—independents, wirehouses, and regional, bank and insurance BDs—with a minimum of $50,000 in GDC in 2009. That survey work was complemented with interviews with six BD executives, along with secondary research that included the Financial Services Institute’s annual Broker-Dealer Financial Performance Studies.

(Inveen and DePardo of FA Insight are regular contributors to Investment Advisor magazine. See their latest contribution to the magazine here on the 2010 FA Insight Study of Advisory Firms: Growth by Design. The 2011 FA Insight Study of Advisory Firms, focusing on human capital and compensation, is now in the field and open to advisor participation. Investment Advisor and AdvisorOne have now partnered with FA Insight on its Studies for three years.)