The recruiting season in 2019 did not go out with a bang. It did, though, see some movement tied to the big news of late October, that Advisor Group is scooping up Ladenburg Thalmann.
What’s ahead for 2020? Industry recruiters offer mixed views.
Recruiting seemed “a bit dead” after “a very unusually busy summer — then things froze up a bit,” said recruiter Jon Henschen of Henschen & Associates, based in Marine on St. Croix, Minnesota. “There were [just] pockets of activity.”
Heading into 2020, “BDs are seeing a status quo in recruiting or are increasing recruiting,” said the recruiter, who focuses on the independent advisor channel.
Some indie firms, though, are bringing on additional recruiters for 2020, according to Henschen. Plus, the amounts of money promised to advisors switching firms has moved around a bit lately at the larger firms, he adds, and could continue to do so next year.
“There’s recently been a mix, with some firm pulling back a little or just keeping things flat,” he said. Firms that are paying high amounts, like Wells Fargo and Ameriprise are … probably going to stay the same in 2020.”
A handful of other firms, though, could lower their levels of transition assistance for departing registered representatives, Henschen adds.
After strong markets over the past 10 years, there’s concern about a market correction in 2020. “A big correction means advisors become like a deer in the headlights,” said Henschen.
“That’s what happened in ‘08-‘09 as the markets started their big descent,” he said. “Recruiting lost out.”
But recruiter Mark Elzweig doesn’t see storm clouds ahead. “I believe 2020 will be a strong year for advisor recruiting — no matter what happens in the markets,” he said.
According to Elzweig, there are plenty of advisors who realize “that good markets don’t last forever and that it’s advantageous to move with big trailing 12 [revenue or production] numbers and happy clients.”
The post-crash advisor recruiting deals of a decade ago have now expired, he points out, which makes these advisors free agents.
“Payout reductions and adverse cultural changes at some firms will drive, also, advisor movement,” the New York-based recruiter added.
While Merrill Lynch left its compensation or payout grid largely unchanged for 2020, Morgan Stanley, UBS and Wells Fargo tinkered with theirs and made shifts to encourage reps to work with high-net-worth clients.
As a result, “Recruiting is going to accelerate at the wirehouses,” said Doug Kentfield, head of wealth management at Steward Partners, an advisor partnership associated with Raymond James, pointing to higher grid thresholds and other compensation changes within this channel.
At UBS, for instance, advisors have seen “the grid being raised pretty substantially,” Kentfield explained.
“If you look at these firms overall, the changes come at the expense of the advisors,” he said. “When it comes to reducing advisor compensation, adivisors have put up with a lot over the years, … but it’s death of a thousand cuts.”
As a result, there should be more “opening up” for recruiting opportunities within the wirehouses, according to Kentfield.
“Given the news at UBS and elsewhere, recruiters are going to be all over these advisors,” the former Morgan Stanley executive explained. “It should accelerate the move from wirehouses to breakaway [firms] and independents.”
This has been the case for the past six year or so, Kentfield points out, and it should continue into 2020 — possibly gaining steam. “Advisors want to explore their [options] though they are concerned about the transition,” he said, which is why Steward positions itself as “going independent with support.”
After compensation cuts at the wirehouses with the markets at all-time highs, “What will happen to compensation when more normalized or down markets return?” asked Kentfield. “It’s going to be interesting.”
Other Industry Triggers
As for what else could prompt advisors to switch BDs in 2020, there will likely be attempts to grab indie advisors from the Ladenburg Thalmann broker-dealers, which are being sold to Advisor Group, and to nab reps within the Advisor Group BD network, too.
Ladenburg includes Securities America, Triad Advisors, Investacorp, KMS Financial Services and Securities Service Network, with more than 4,000 advisors. Advisor Group’s network comprises FSC Securities Corp., Royal Alliance Associates, SagePoint Financial and Woodbury Financial, which have a combined 7,500 reps.
“Selling [their practice] is one way” that advisors respond to such situations, “and for many, there’s the wait-and-see approach,” Henschen said, adding that LPL Financial “probably has some recruiting deals in works” tied to the Advisor Group-Ladenburg merger.
“It takes months, if not years, to get advisors to make a move,” he added.
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