When Avery Johnson was fired as the Brooklyn Nets’ head coach last month, he told the press “Right now, it’s a player’s league.”

The same can be said of the brokerage business. Few would deny that there’s been a power shift from the branch office manger to the “players,” the advisors he or she manages. We asked some insiders to look into a crystal ball and speculate what the role of the branch manager will be in the future.

“In so many ways, advisors are in the driver’s seat right now,” says Barbara Herman, senior VP of Chester-NJ-based Diamond Consultants. First, over the last few weeks, the major firms announced their compensation plans for 2013 without reductions in payout for top advisors, she says. “The firms have demonstrated a reluctance to make changes in compensation that negatively impact the best advisors, acknowledging that advisors are willing to move over these issues of compensation.”

In many respects, she says, successful advisors are viewed as “free agents.” At the same time, branch mangers have lost much of the control they once had over their own branches, says Rick Peterson, who heads Spring Tx-based industry recruiting firm Rick Peterson and Associates. And, of course the once enviable compensation packages have dwindled dramatically in recent years.

A manager at a large wirehouse branch in the south says his firm just revealed that 10% of his quarterly earnings will be deferred for four years. Additionally, he said the firm will now require every broker under his management to bring in five households with at least $250,000 in order for him to earn his quarterly bonus. “The expectation used to be for each broker to bring in 1 or 2 such households. This new and impossible metric is going to cut our pay in half,” he says.

“It used to be that the manager was kind of the king of the fiefdom,” Peterson says. “We’ve come full circle. Now it’s the ‘players’—the advisors—who run the show.”  And, if enough of them don’t like a manager they can usually get him replaced, he says. “Today’s managers now have to be best friend, big brother and father confessor to their advisors in order to remain successful—and even keep their jobs.”

“As the advisor’s role is changing, so are our expectations of the BoM,” says Herman. Issues like social media, stricter recruiting and retention metrics, continued industry consolidation, and the shift toward more ‘producing’ managers means “branch managers very often don’t know who they’re supposed to be on any given day,” she says.

Both Herman and Peterson believe the branch manager’s position will not become obsolete. What it will look like in five or ten years time, they feel, depends largely on how the regulatory environment evolves. But, both expect positive outcomes in the long run for managers who are willing and able to stick it out.

“I know that, ultimately, the importance of highly skilled branch managers will once again be acknowledged and rewarded by Wall Street firms,” says Peterson. “I just can’t say when.”

Herman concurs, adding:  “a major overhaul may be necessary with expected new regulatory requirements, including the possibility of a uniform fiduciary standard”.

Like a number of other industries, Peterson says, “Wall Street always over-reacts with issues of compensation—in both directions. It used to be that BoM compensation was really too high. Now, it’s been cut too dramatically. I think we’ll see this with advisor compensation, too. Eventually things should even out.”

But first, he says, “I think we’re going to see a whole new kind a BoM emerge; someone willing to do the job for a lot less money.” He will very likely not be as competent, sophisticated and polished as the tradition BoM, Peterson says. And, far fewer people will aspire to the role.

“However, when you place less competent managers in a regulatory environment that’s growing increasing rigorous, and you strip away their power, I think it’s just a matter of time before disaster strikes,” he says. He feels FINRA and the SEC will inevitably slap firms with more penalties because “you cannot have the ‘player’—the advisor—dictating the game. Someone has to put controls on them. I think the need for more professional—and better paid—management will become painfully apparent to the industry.”                                                                                                         

Recruiting will be another problem, he predicts. “Advisors fall in love with the guy who recruits them. So, if you have complex directors recruiting for satellite offices that are run by other managers, advisors may indeed not want to stay.”

“Independent and hybrid brokerage models are thriving,” adds Herman. “They are drawing a lot of high-end wirehouse advisor teams. And these teams know the value of professional management, particularly by someone from the wirehouse world. What we have begun to see, and what I expect we will increasingly see, are managers being a part of the movement into the independent space. They can have equity interests in these practices and participate in the huge upside.”

THE ‘PLAYERS’ WEIGH IN:

“What bugs us most about today’s branch managers,” says a legacy Morgan Stanley advisor in the Northeast, who asked to remain anonymous, “is that they have no authority anymore. The firms view them as overhead, and since there is such an abundance of them, they’re first and foremost afraid of rattling the people upstairs and possibly losing their jobs. When we need help getting things done, they have to ask or yield to higher-ups. Even complex directors have very little authority—they’re basically recruiters,” he says.

“Advisors definitely prefer branch managers who were once advisors themselves,” added a legacy Merrill Lynch FA in Manhattan. “Yet, who is going to give up a book in this environment to become a manager?  What used to be a big step up is now anything but. No one wants to be a BoM right now.

“But, we still want managers who will fight for us,” he continues; “managers who aren’t   afraid to stand for us and help us get things done. I think this fact, coupled with an increasingly tough regulatory environment, will create a shift back to more skilled and better paid BoMs. Something has to give.”

In the meantime, Peterson notes, the ‘title’ of branch manager still carries benefits like prestige, input with the firm, and, for those who also produce, access to community heavy-hitters and a whole inner circle of people who can help them build a great business.

“Right now, BoMs are under-compensated. But, as I said, I eventually see that changing.”  Branch managers in the brokerage business are still better compensated than their peers with similar skill sets in industries like insurance, healthcare, and automobiles industries, he notes. “It’s still a pretty good job. And eventually, I believe it will get better.”