Diamond Consultants, a financial advisor recruiting and consulting firm, released its annual white paper, The Landscape of the Wealth Management Industry.
The report is designed to be an objective and comprehensive look at changes in the industry, key players and trends that can affect advisors and their businesses.
The report looks back on the past year and determines several key trends it sees in the wealth management industry.
According to the report, there’s little doubt that the following four trends will continue to reshape recruiting in the brokerage world:
1. More big firms will leave the broker protocol.
Late last year, both Morgan Stanley and UBS departed from the Protocol for Broker Recruiting, which was established in 2004. Since then, more than 1,600 broker-dealers and registered investment advisory firms have signed on to it.
With the submission of a one-page letter of withdrawal, these two firms effectively took themselves out of the game, according to Diamond Consultants.
“For some time, wirehouses had ceased being the recruiting powerhouses that they historically had been,” the report states. “But with [Morgan Stanley and UBS’] exit from the protocol, this has lead the industry to believe they are out completely.”
According to the report, it remains to be seen if the protocol will remain intact.
“Will Merrill Lynch, Wells Fargo and other member firms exit as well?” the report asks. “Regardless of what these and other firms decide relative to the protocol, one thing is certain: The rules may have changed but advisors will not be thwarted in their efforts to do what’s best for clients — including changing firms even in a non-protocol world.”
2. More opportunities beyond wirehouses.
The independent model is no longer seen as an outlier — or “a place where those advisors who couldn’t cut it at the big firms would go to eke out a living in the shadows of the ‘real firms,’” as the report says.
A recent Cerulli Associates report found that the three major industry independent firm consolidators grew their affiliated assets under management by a 5-year compound growth rate of more than 45% from 2011 to 2016.
The report looks at further evidence that the independent space will continue to thrive. For example, the new Republican tax plan favors business owners, which the report says makes independence even more attractive.
Another example is that the investment in technology within the space has produced a more sophisticated platform, which is not only attractive to advisors but to their clients as well.
The report also notes that more traditional firms are distributing their products and capital markets capabilities to independent firms, providing the same level of access to which advisors in the wirehouse world have become accustomed.