Unlocking Real Value Blog

Breakaway Trends – Which Way is Up?

Everyone (well it seems like everyone) seems to like to opine on whether the breakaway trend will continue, whether wirehouses will recover their places of prominence, etc. While the topic is interesting, a recent survey which concluded that the breakaway surge is over had what I thought were some much more interesting results that were buried in the fine print.

The study I am referring to is a recent one by Cogent Research, which interviewed 1,560 registered reps and advisors. The study found that advisor satisfaction is up 15% over last year, led by Merrill. The article rightly pointed out that the large retention bonuses paid advisors after the Bank of America merger probably had a lot to do with this – and that these bonuses were unsustainable. Hardly a seeming end to a trend…..

Advisor satisfaction at Merrill is now a whopping 49% – considering that advisor satisfaction at the regionals is 81%, I would hardly be jumping up and down if I was in management at Merrill. As I said above, I don’t personally read a lot into these numbers that indicates the trend to breakaways is over.

But I found a few other things in the article much more interesting:

– For the first time, the majority of revenues of those surveyed which were derived from fees surpassed 50% for the first time – reaching 54% in fact.

– While fee income lagged at banks, which was not surprising, the fact that fees only accounted for 35% of revenue at the regionals did surprise me – I thought the number would be higher. Given the number of large producers that have joined regionals over the past few years (regionals have also benefited at the expense of the wirehouses), I would expect this percentage to increase quickly.

– Finally, the number of advisors forming partnerships leveling off at 22% overall – it was 31% at the wirehouses and 37% at RIAs. Again, I would have expected both a higher percentage and an upward trend.

I will refrain from opining on the breakaway trend lest I become one of those referenced above; however, regardless of where an advisor sits, there seems to be little doubt that the trend toward fee-based income increasing at the expense of commissions is undeniable and irreversible.

Leave a Reply