Registered Rep.'s Annual Broker Report Card Shows FAs Are Disgruntled

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We’ve been polling wirehouse financial advisors about how satisfied they are with their firms for 19 years now. And, once again, I am struck by how optimistic—or is it ambivalent?—financial advisors at the big firms are. On the one hand, FAs at the remaining big five national brands say their overall work experience (based on 16 factors, from compensation to compliance) rates at about a C—or lower. But on the other hand, many reps at these somewhat tarnished institutions say their firms are the best to work for. Really.

I won’t get into details (you can read online in a few days), but I don’t get it. They complain, but, according to our survey, many say they’re not going anywhere. Golden handcuffs? What? I am not sure I understand how you can rank your firm as basically, “okay,” or “lousy” and not be actively searching for something more akin to “excellent.”

Edward Jones reps once again award their firm an A, or 9.4 out of a possible 10 with an amazing 43 percent of those queried completing the survey. UBS Wealth Management Americas and Wells Fargo Advisors reps rank their firms an F. (Please visit RegisteredRep.com on December 4 when our 19th Annual Broker Report Card survey is posted; the survey will also appear in the December issue of the print magazine. For last year's click here. For individual firm results, click here.)

Anyway, we’ve been carefully watching advisor movement this year, figuring that after the embarrassing and catastrophic events of 2008, the floodgates would open and wirehouse FAs would decamp to higher ground (to RIAs or independent firms, which, for the most part, avoided missteps such as, auction rate securities, mortgage-based derivatives and illegal tax strategies). There actually has been a lot of moving around in 2009. Discovery Database, a company that tracks advisor movement, says that so far in 2009 (that is, from January through October), 4,122 reps left the wirehouse channel to move to another b/d channel (i.e. independent b/d or bank). That compares to 2008, when only 910 reps left the wirehouse channel to another b/d channel. It should be pointed out that the 2008 stats measured only five months, from August to December, since Discovery only started keeping such stats in August 2008.

Despite the incomplete data, you can see that the housing/credit debacle really did smash the ties that bind (and those ties were differed comp plans, which often held company stock), allowing FAs the freedom—and incentive—to move. And firms have been only too happy to lend a hand, offering big money to some. In fact, the whales (big producers with the right kind of book) have been getting crazy forgivable loan deals (routinely grabbing 200-percent-plus of trailing 12 as long as goals are hit). It should be noted that wirehouses have been cleaning house, forcing out smaller producers (around $300,000 and below). According to Discovery, wirehouses shed (voluntary movement or firing) 12 percent of their registered reps: In January there were 97,000 wirehouse reps, in October, there were 85,000 WH reps.

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REP. Editor-in-Chief David Aldo Geracioti on the business of Wall Street from a free-market perspective.

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David Aldo Geracioti

Is the editor-in-chief of REP. magazine.  He is also a devotee of the Austrian School of Economics leading lights Ludwig von Mises, Friedrich von Hayek, Murry Rothbard and to other thinkers in...
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