Unlocking Real Value Blog

Not So Fast – Predicted Movement Among Wirehouse Advisors Overstated

There has undoubtedly been a lot of movement of advisors over the past few years. And there is no question that the wirehouses have been among the losers. But a recent prediction by Aite Group that 4,500 advisors at the four largest brokerage firms will strike out on their own seems way overblown.

The number of advisors surveyed? 151 – their prediction is quite an extrapolation! Now, I agree that as the lock-in effect of current contracts expire, as do some of the benefits of retention packages offered in the wake of the financial crisis, there is sure to be movement. But striking out on your own is not an easy proposition. It takes years of planning and a willingness on the part of the advisor to become a business owner – to work harder and longer for the promise of a larger payout at the end.

So there will be movement – but a great deal of it will be advisors switching from one B/D to another – and perhaps jumping between a regional and a wirehouse or vice verse. But all to the independent channel? Not likely. In addition, a number of the wirehouses have announced plans to reduce the overall number of advisors and to raise minimum production requirements. Being the largest is not viewed as being as important as it was in the past. So there will be movement, and advisors will leave the business. But not everyone who moves will go independent.

Another interesting fact from the survey is that most wirehouse advisors are either “satisfied” or “very satisfied” with their current employer, and the number of advisors who plan to stick to their current employer has doubled since a 2000 survey by Aite.

So beyond the headline is the reality that there will always be movement among advisors – and yes, money and retention bonuses and lock-ins matter – but advisors who are contemplating moves must do so keeping in mind where they will be mostly likely to succeed. And for many traditional B/D advisors, that model works just fine.

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