Multiple publications have reported recently that the massive switching of firms in the advisor population will subside this year, and that 2010 will be about staying put and focusing on growing your books. While I agree that I don’t expect to see nearly as much movement between firms this year, I do think that advisors are not as content or as married to their current firms as senior leadership at the major firms might hope that they are. (Full disclosure: I am a recruiter and have a vested interest in advisors who are looking to move.)

Many advisors worried that 2009 marked the “last hurrah.” We all believed that the transition packages being offered by the major firms were at a high water mark- topping at 280 percent. Plus, advisors’ deferred comp was all but eviscerated, thus making the golden handcuffs that tied them to their firms irrelevant. And, clients were begging their financial advisors to take action—blaming the big brokerage firms, and not the markets, for much of the loss of their wealth. It was the perfect storm, setting the scene for those advisors who knew that they would want to monetize their business at some point, to do so. And, the numbers proved this.

So far, 2010 is on pace to beat last year’s FA migration. According to Discovery Database, which tracks rep movement, in January, 2,372 reps were identified as moving from one b/d to another. But only 360 were wirehouse reps. And of those, just 29 percent stayed in their channel, merely switching firms, Discovery says. Of these reps, the largest movement came from independent and institutional b/ds, Discovery says. “There were 645 (27 percent) reps that moved from an independent b/d and 486 (20 percent) reps from institutional b/ds. The remaining reps were dispersed amongst the following channels: bank, discounter, insurance, mutual fund, regional, wirehouse & other,” Discovery says.

If January’s trend holds, FA movement in 2010 will surpass last year. In 2009, over 22,000 reps moved from one broker/dealer firm to another. In a recent report, Discovery says: “The largest portion of these reps came from the wirehouse channel, with an average of 37 percent of all movement per month coming from a wirehouse broker/dealer. Of the wirehouse reps that switched firms during the year, 48 percent stayed within the wirehouse channel. Regional, independent and institutional BD’s each acquired 13 percent of the wirehouse movement, while bank b/ds gained 7 percent and the remaining 13 percent were scattered amongst other channels. Mergers such as Citigroup Global Markets Inc. and Morgan Stanley & Co., Inc. into Morgan Stanley Smith Barney and the combination of Wachovia Securities, LLC and Wells Fargo Advisors, LLC, are not reflected in Discovery’s rep movement reporting.”

I agree with a recent news report entitled “Broker Recruiting Gets Rational,” where the news report suggested that “brokerage firms appear to have taken a break from their costly musical-chairs game of broker recruitment.”

But it’s not necessarily because the transition packages being offered by the wirehouses are lower than where they were in 2009. In fact, for top producers, deals are even bigger than last year, topping at 330 percent of production. I believe it has more to do with the fact that both the firms and their advisors are becoming more thoughtful and pragmatic in their selection process. That is, firms are focused on recruiting only growth-oriented top-quintile advisors with clean books of business and the advisors that were not tempted by last year’s big deals seem to be a more thoughtful lot. The advisors fall into one of three categories:

  1. Completely risk averse and have no intention of ever moving- short of being forced out the door;
  2. Don’t believe that moving would be in their clients’ best interest and stay put, because they put personal financial gain behind clients’ needs;
  3. Believe that the next step in their careers is not to go to another wirehouse but rather to go independent in some form because they believe that this model will allow them to better reach their goals

Bullet point number three above is the reason why TD Ameritrade, Schwab, Fidelity and Pershing are all reporting that their pipelines of interested advisors is more robust than ever in their collective histories. And, these firms would further report that the level of interest from the “break-away broker” community, that is the wirehouse advisor considering independence, accounts for an overwhelming percentage of those pipelines. I don’t for a minute believe that everyone considering going independent will actually do so, but I do think that over time, many of them will because they have figured out that over the long term (usually five to seven years, at least), the economics of independence equals and then exceeds those of taking a big check from a wirehouse; they place a higher premium on quality of life and entrepreneurial spirit, and they know that product and service is largely commoditized, making it possible to offer their clients the same solution set in the independent world as at their current firm.

I predict a year of much less job hopping in the advisor community than in 2009, but the 330 percent deals being offered by the wirehouses and the benefits of independence will make advisors think carefully. While I won’t guess a number, let me say (albeit rather wimply) that advisors are paying attention and many will pull the trigger.