Advisors Are Unhappy, and They Have Options, Recruiters Warn

As the wealth management industry prepares to tackle a new and potentially very challenging year, more advisors than ever before are seeking counsel and clarity on the next phase in their careers.

At the same time, many wealth management professionals are craving greater independence and flexibility, and the aging of the industry is putting a spotlight on the closely linked issues of succession planning and attracting the next generation of diverse and dynamic talent.

This was the conclusion of a recent presentation put on by Fidelity featuring three advisor industry recruiting pros, including Jodie Papike, the president of Cross-Search; Ryan Shanks, the co-founder and CEO of FA Match; and Louis Diamond, president of Diamond Consulting.

The trio urged all advisory industry leaders to review their talent recruiting and retention strategies in 2023 — or risk being left behind in a rapidly evolving and increasingly competitive industry.

Massive Missteps

There has probably never been a time when more advisors were unhappy at their current firm and seriously contemplating a change in direction, according to the panelists.

“From my point of view as a recruiter, I can tell you that there are a lot of firms that are making massive missteps in how they are recruiting and retaining advisors,” Papike warned. “They have not kept up their service levels, and so, many advisors are feeling like they aren’t being supported or serviced at the level they need and expect.”

Papike suggested the rocky markets have caused some hesitation among advisors who are contemplating moves, but if and as markets rebound, she expects today’s accelerated pace of advisor transitions to pick up even more steam.

“In our experience, the market volatility has caused some people to sit with their unhappiness and avoid disruption to their business and their clients,” she explained. “However, there is a ton of pent-up discontent that is just waiting to be acted upon.”

The panel noted that advisory professionals were moving in all different directions, with established teams breaking away form legacy wirehouses, individual advisors moving among independent broker-dealers, and captive insurance professionals making the jump to join RIAs.

‘Options Are Everything’

As Diamond emphasized, “options are everything to advisors right now.”

“We hear advisors coming in all the time saying they have always been in one model, but now they are hearing about all these new potential business models out there with more autonomy and flexibility, and they are intrigued,” Diamond said. “Many advisors want to find a home where they have more than one option in terms of how to run their business, so they can have room to evolve and change with their clients’ expectations.”

Asked if there is a standout model that seems to be getting the most attention, Diamond said yes, but there is also a lot of diversity in what advisors are seeking in a transition.

“The approach that is getting the most attention at this moment is what I call the ‘supported independence’ model,” Diamond said. “It’s a model where the advisory professional can achieve independence without having to tackle all the things that a small or midsize business in America has to do to get off the ground running.”

As Diamond noted, most advisory professionals who have worked in a larger firm might be great at their core job, but they don’t know the first thing about procuring real estate, building and operating a website, setting up a 401(k) plan for their own staff and so on. And they also want help with the actual transition of their book of business.

“So, we are seeing real recruiting success at firms that can provide a turnkey, white-glove transition offering,” Diamond said. “The firms that are successful in bringing in top talent are the ones that can tell this transition story really well.”

Different Strokes

In Shanks’ experience, different advisor demographic cohorts have different motivations for considering a transition. For example, younger advisors who don’t yet have a ton of assets or portability issues to worry about are moving primarily to find a better long-term cultural alignment at a firm where they feel like they can grow on their own terms.

“Established wirehouse teams who are breaking away have their own motivations,” Shanks said. “In short, they want to own it. They want to have control over their operations and the client experience.”

The panel emphasized that the optionality facing advisors is as great as it’s ever been. That means advisors can be selective about their new home, but it also comes with added complexity.

“Today, as you go out and talk to five different firms that want to bring you in, they can all look and feel so different,” Shanks said. “It’s exciting but also very intimidating.”

According to Shanks, the factor driving most of the movement of advisors is a desire to do things differently.

“There are more compelling choices and more mousetraps that have been built to meet advisors where they are and where they want to go,” he explained. “It’s not just different shades of the same thing, which is what advisory professionals have been used to for a long time.”

Dry Powder

The panel agreed that another factor accelerating advisor transitions is the fact that there is a significant amount of both inside and outside capital pouring into the industry.

“It used to be that the wirehouses where the only ones out there willing to write the big checks to bring in the leading advisors and teams,” Shanks pointed out. “Now, we see big checks coming out of the IBDs and the RIAs, too, even those who aren’t backed by private equity. Those older advisors who are ready to take chips off the table and who are starting to think about the transition away from the business, they have so many options.”

What Comes Next

The panel concluded with a prediction that the movement of advisors will continue to accelerate and diversify in the years ahead.

“In decades past, there was one direction of movement,” Papike said. “Advisors were leaving wirehouse because they didn’t want to be employees anymore. And what independence meant was joining up with an independent broker-dealer.”

It was a relatively easy process and there was a basic explanation.

“Now there are so many options across the independence spectrum,” she said. “You have options where you are technically independent, but you have a lot of extra resources on the table. On the other hand, you can go all the way and own your own RIA and truly be out there on your own. Between those poles there is almost an endless number of options.”

According to the panel, an essential takeaway for practice leaders is that the next generation of advisory talent wants complete independence — a new way of being independent.

“I think the legacy broker-dealers have to think about this very carefully,” Papike warned. “In the next 10 years, if they are still functioning exactly as they did in the past, they are going to be missing the next generation. People don’t call us saying they want to join a broker-dealer. They see that as old school. It’s all about being an RIA for them. That’s the direction they want to go.”