Financial advisors’ appetite for breaking away from wirehouse brokerages shows no sign of abating, and all signs point to a second wave of departures due
to the structure of employee retention packages, says a new report from Aite Group released Tuesday.
The breakaway trend that peaked during the financial crisis and has continued to plague the wealth management industry is likely to pick up momentum as the value of wirehouses’ retention packages wanes, according to the Aite survey of 151 employee advisors conducted in March.
“Locked-in wirehouse advisors may be willing to leave their employer two to three years before their retention contract expires,” said Alois Pirker, research director with Boston-based Aite Group and author of the report, in a statement. “At that point, it will become clear whether the brokerage firm has done a good job catering to its advisors, or whether the lock-in contract was the sole binding element. The substantial sign-on bonuses currently offered by leading firms could be the catalyst that kicks off the next wave of breakaway activity.”
Although leading wealth management firms—especially Merrill Lynch and Morgan Stanley—retained many of their top-producing advisors by offering retention packages, those packages now appear to be leading toward a second peak in breakaway activity. The first wave of breakaways in 2008 and 2009 consisted mostly of not-locked-in advisors.