Tim Oden, a Charles Schwab executive, says as far as the firm’s concerned, the breakaway-broker phenomenon is going strong. The proof is the number of prospects attending this week’s Schwab Impact conference in San Francisco, which has attracted about 2,100 advisors and roughly 1,900 other guests.
“We have 87 prospective breakaway brokers at this year’s Impact, double last year’s number,” said Oden, senior managing director of business development for Schwab Advisor Services, in an interview on Thursday with AdvisorOne. “They can come all week. We have one day of breakout sessions for them, regional dinners and other ways for them to interact with advisors, vendors and staff.”
A big reason for this uptick, Oden says, it that a large number of wirehouse brokers will see the terms of their retention bonuses end in January 2012. “They have retention packages that will sunset next year, and so they’re earnestly kicking the tires,” Oden explained. “This is when they could decide to make a move.”
The prospects, he says, mainly come from the wirehouse firms (Merrill Lynch, Morgan Stanley, Wells Fargo and UBS). However, some also come from independent broker-dealers, while others are RIAs who custody with rivals and “are revisiting that relationship,” said the executive.
“A great deal of the talks we are engaged in with prospects concerns the sunset provisions of their retention packages, which means they are through with the major decision-making process. They have made it and are now being thoughtful about when” they make the move to independence, said Oden. And this decisiveness “bodes well” for recruiting in the first and second quarters of 2012, he notes.
At the Tiburon CEO Summit held in mid-October in San Francisco, consultant Chip Roame (left) said he believed that “only 300-500 successful advisors choose to go independent each year,” while about 5,000 wirehouse advisors were let go in 2010. Based on his numeric analysis, the “breakaway broker” trend is more hype than reality, the consultant shared.
As brokers move out of the wirehouses, some — roughly 40% — must decide what to do with their commission-based business. “Will you handle some of this yourself? Join another firm to take care of it? These are the types of questions that serve as a starting point — do you need a broker-dealer?” explained Oden. “If so, you’ll have to spend some time on this issue and look into the future of your business.” Some could decide to work with an independent broker-dealer, join a corporate RIA, become part of an existing RIA firm that has a broker-dealer affiliate, or not move out of the wirehouse model.