Skip navigation
Recruiting Has Been Tough in 2011 but Experts Say It Should Improve Next Year

Recruiting Has Been Tough in 2011 but Experts Say It Should Improve Next Year

What a heck of a summer. In August, Mr. Market behaved like a schizophrenic. Such volatile conditions, no doubt, cool clients’ ardor for risk. For most, the challenge of merely keeping their clients calm takes precedence over seeking greener pastures at other firms.

“In short,” says Chip Roame, managing principal of Tiburon Strategic Advisors, a research and consulting firm, “reps don’t move when markets are volatile, because they risk having clients not move with them.”

Nevertheless, the pressure on branch managers to continually recruit—to successfully recruit the big guys—remains constant. And, once again, they say they’re finding themselves in all-too-familiar territory—under pressure.

Mindy Diamond, a recruiter with Diamond Consultants, of Chester, N.J., agrees. “Despite the volatile market and the huge retention packages that are keeping advisors in their seats, branch managers are being held to the same recruiting standard as always. And, right now, it’s a virtually impossible standard to meet.”

Says a wirehouse BoM on the West Coast who asked that his name not be printed: “The huge retention packages firms have been doling out in recent years have gotten them exactly what they were looking for: Advisors are staying put.” He continues, “Last year, they were dangling a carrot before us to motivate us to recruit. Now it’s a stick. Next year, they’ll be threatening to fire us. However, we’re holding onto many of our existing reps by the skin of their teeth. So, if we’re fired, the firms are going to lose a lot of our reps. I’m taking reps on margin right now just to fill seats. A lot of my peers liken our predicament right now to the Bataan Death March.”

A wirehouse complex director on the East Coast, who also asked for anonymity, agrees. “We recently recruited two new FAs. However, at the moment, they’re literally frozen in their tracks. Clients can be fickle and, if you give them a reason not to move—like the current volatile market—they’re very tempted. I’ve also noticed lately that, when a new FA does come over, he’s not bringing all his assets with him. If he manages $150 million, $50 million of that doesn’t end up coming. It’s not staying at the former firm; it’s being liquidated and going to RIAs or banks.”

As a result of all these challenges, he says, wirehouse managers are looking to recruit from places they typically didn’t in the past. “We historically haven’t loved bank brokers. The industry’s perception was that they typically haven’t had to work very hard. But, we’re looking at them now.”

Sign up for Registered Rep. eNewsletters

Independent channels offer another option, he says. “The problem is, once an advisor goes independent, it’s incredibly tough to recruit him back to the wirehouse world. That leaves us with the old standby: new trainees. Unfortunately, their success rate has been abominable.”

Theoretically, the recent purchase of embattled independent b/d Securities America—with its roughly 1,700 FAs by Ladenburg Thalmann Financial Services—may appear to be a ripe recruiting ground. But experts agree that it’s probably not a great opportunity for everyone—particularly right now.

“LPL & Commonwealth have picked off a few good teams,” says Roame. (Just last week, for example, Commonwealth Financial announced that it grabbed three teams worth $700 million in assets from Securities America.)

“But, we’ve not seen a big move out of Securities America just yet. And, new retention packages will likely help keep minimize movement.”

Philip Palaveev, president of Fusion Advisor Network, says the recruiting market is fertile for independent firms. “Plenty of wirehouse managers tried to recruit from Securities America,” he says. “But, they weren’t successful, because independent brokers almost always want to stay independent.”

“I think SA reps want to wait and see how much money will be available after the acquisition to help them grow their businesses before moving,” says Rick Peterson, who heads Spring, TX- based industry recruiting firm Rick Peterson & Associates. And if they do leave, he agrees that other independent firms stand to gain the most.”

Nevertheless, industry experts do see light at the end of the tunnel. “There is a new wave of recruiting coming,” Diamond says. “I’d say the tipping point will be within the next six to 12 months for quality managers who have good stories to tell.”

“Recruitment deals are—and will continue to be—strong,” says Rick Peterson, who heads Spring, TX- based industry recruiting firm Rick Peterson & Associates. “And a lot of retention packages will expire—or diminish greatly—on December 31.”

But, even advisors who remain under them are growing increasing frustrated, Diamond says, “and some of them will leave,” particularly those who’ve not been able to reach their production targets because of the market. “It’s important for managers to focus-- first and foremost-- on retaining their current advisors. The last think you want to do in the midst of all of this is lose an advisor, because it can send out shockwaves as you try to recruit new folks. Additionally, keep honing your relationships with prospects who may not join you now, but sometime down the road.”

Palaveev cautions that the recruiting market “doesn’t changes overnight. I think we’ll continue to see a lot of wirehouse managers struggling with this issue. The bottom line is that they’re going to have to be very creative and in how and from where they look to recruit.”

And, reps may want different compensation packages going forward, Roame says “Since they’re less certain of their ability to quickly build production in a volatile market, they could push for more lenient terms on their ‘deals’ when moving to a new B/D. No one wants to owe back his signing bonus.”

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish