In the dynamics that industry recruiters call the “push and pull” of wealth management firms’ fight to win talent, top financial advisors represent the main prize up for grabs. And several thousands choose to change their brokerage or registered investment advisory firms each year. But they do so for any number of reasons on a wide range of timelines.
Advisors “have a tremendous amount of power” as the managers of the client assets sought by an expanding array of firms, said Jason Diamond, an executive vice president and senior consultant with advisor recruiting firm Diamond Consultants. And those firms now offer more options than ever in response to the complex mix of factors spurring advisors’ moves today, Those include recruiting bonuses, to be sure, but also operational and technology resources and degrees of independence.
“This process needs to be iterative. I think advisors put a lot of pressure on themselves to nail it,” Diamond said. “The iterative process I believe in very much, because, ultimately, I think that’s how you home in on the right answer.”
READ MORE: The ‘fundamental’ talent shortage looming over wealth management
A ‘fascinating’ question
The 9,615 experienced advisors who switched firms last year — about 800 per month — each did so “with their own ‘why,'” according to the latest annual tracking report by Diamond’s firm. Nevertheless, it and other recent research suggest that the shifts from one firm to another have remained relatively consistent in volume, with the key takeaway that wirehouses have sustained the largest net losses in recent years and independent brokerages and RIAs have gained the most. Regardless, most moves still involve advisor teams who traded in their previous company jerseys for another one in the same channel of the industry.
Advisors either consider switching brokerages or RIAs with an impulse “to take charge of the situation or decide what’s best” as quickly as possible, or they go slowly with a measure of restraint, “depending on what’s going on with life” or on how well they can tolerate the downsides of their current setup, said Jodie Papike, the CEO of independent advisor and executive recruiting firm Cross-Search.
“What is so fascinating is, so much of an advisor’s decision to stay or go is an emotional decision,” Papike said. “What I find is that every advisor has a tolerance level, or sort of a pain threshold of what they can look past or deal with.”
That means that corporate service deficiencies, practice succession questions, unexpected company acquisitions or any other rationales play out differently for every advisor in an industry with about 300,000 advisors and over 1 million employees managing $90 trillion in household wealth. Most cite benefits to their clients and staff as the key consideration. Some simply need more business scale and room to grow based on their own designs and structure.
READ MORE: Independence? It depends
Anecdotally speaking
For example, Franklin, Tennessee-based SageSpring Wealth Partners dropped Raymond James Financial Services as its brokerage in December to operate as an independent RIA using Dynasty Financial Partners’ platform after its search for “a tech stack that was really robust,” according to SageSpring President Jeff Dobyns.
At more than 45 advisor teams with $6.4 billion in client assets and an outside minority investor in Merchant Investment Management, SageSpring decided to leave Raymond James, “a great partner” over multiple decades, as part of carrying out the firm’s long-term goal of managing $50 billion in 10 years’ time, Dobyns said. A need for technology upgrades and integration flexibility formed “the impetus” behind their “quest to find firms that can help,” he noted.
“We really wanted to have more access to better technology that was coming online,” Dobyns said. “It just seems like it’s coming online so fast that people can’t even keep up.”
SageSpring spent roughly a year researching its potential landing spot. Diamond said he recommends that advisors plan for roughly a six- to 12-month process in order to give themselves enough time to examine their possible destinations while reducing the chances of litigation from their prior firm that could tie up some aspects of their move in a court case. The teams have some “thorough homework” to do when thinking through what channel of the industry may be the best fit, so there’s often a period of “paralysis analysis,” he said.
The push to go typically stems from frustrations around new policies at one firm or another, such as the cuts to base pay for some UBS advisors, which the firm acknowledges will likely lead to higher attrition this year. In fact, the four wirehouses’ recruiting efforts ripple across the whole industry, with “Merrill’s very, very aggressive reentry into recruiting” adding into “that concept of, advisors have more choice than ever before,” Diamond said. And the new firm must beckon to the prospective team as “a draw to something bigger and better,” he said.
“We use the phrase ‘better enough,'” Diamond added. “Moving is a hassle and moving is a pain, so when advisors move it’s because they’ve found something better enough to justify that hassle.”
READ MORE: Fighting the tides of wirehouse attrition
By the numbers
More than 9,000 experienced advisors deemed the logistics of switching firms acceptable in 2024 — or nearly 6% of the industry’s ranks of those with four or more years of tenure, according to his firm’s research.
The firms recruiting them are willing to pay big bucks. For wealth management firms whose advisors are W-2 employees, offers of 300% of annual revenue are “commonplace,” but they vary from 100% to above 400% for “the right teams,” the report stated. Among independent brokerages, the historical average of 30% of trailing 12-month production or gross dealer concessions has risen to about 50% or even above 100% in certain cases. And those deals are getting more valuable even as regulatory scrutiny of the industry and slimmer industry profit margins are pushing in the opposite direction.
“It’s the most competitive recruiting environment of all time,” the report stated. “Basic economics teaches us that when demand exceeds supply, prices go up. Demand for quality advisors vastly outweighs the supply, and so firms are forced to continue to pay near top dollar to recruit successfully.”
If those recruiting bonuses amounted to the sole reason for an advisor’s move, though, the net gains and losses in the industry’s channels would look much different. Despite their rich offers, wirehouses lost the most advisors in 2024 at a net 605, followed by 325 fewer on the headcounts of boutique employee wealth management firms. On the plus side, regional brokerages picked up 136 experienced advisors on a net basis, and independent firms added 689 to their ranks. In terms of individual moves, Diamond’s report cited JPMorgan Chase’s mega-deal recruiting an ex-Merrill team with $28 billion in client assets as the biggest of the year, followed by two giant Merrill recruits with a combined $16 billion that left JPMorgan.
“While 9,615 advisors changing firms feels like a high number in a vacuum, in comparison to recent years (9,674 in 2023 and 9,006 in 2022), it remains to be seen if that is merely a tremor before the earthquake to come, or simply another data point suggesting that annual experienced advisor movement is, on average, 9,000-10,000 advisors,” the report said.
READ MORE: What to expect in advisor pay
The ‘rep’ snapshot
At the specific firm level, LPL Financial’s continuing record advisor headcounts based on accelerating recruiting moves and M&A deals stood out in 2024, as reported by the Diamond Consultants study and another documenting industry moves by ISS Market Intelligence. Rather than focusing on experienced financial advisors, the latter research survey culled data on the registered representatives with brokerages and the investment advisory representatives with RIAs. In the past 10 years, between 3.7% and 5.1% of them have changed firms, with a low ebb of 29,112 in 2020 and a high mark for the decade of 39,882 in 2022.
During the past five years, wirehouses (8,303) lost the most reps, with insurance-owned brokerages (7,431) and bank-based firms (2,234) as the next biggest losers across channels. Retail-facing RIAs tacked on the most reps to their firms, at 8,739, with independent brokerages like LPL in second place as a combined channel at 6,332 and regional broker-dealers in third at 2,198. In the independent brokerage channel, LPL dominated its rivals to the tune of almost twice as many new reps as the combined additions of the next nine biggest recruiters. Across the industry, the ranks of brokerage-only reps dropped 18%, while the number of dually registered BD-RIA reps surged by 4% and the volume of RIA-only reps soared by 28%.
“The most common destination for departing reps was firms within the same distribution channel,” the ISS MI report stated. “However, a significant number of reps switched channels, drawn by higher payouts, improved access to technology and closer alignment with client interests. Since the start of 2020, nearly 10% of wirehouse reps have moved to other channels, primarily to traditional and independent firms. While more reps joined than left independent firms overall, the channel was the largest source of new reps for retail investment advisors, which netted the largest gain from channel switchers.”
READ MORE: How consolidation is testing fiduciary duty in RIAs
Service and M&A troubles
Inside of that statistical backdrop, M&A consolidation and the problem that “many, many firms have lost touch with what it takes to provide an appropriate level of service to advisors” are playing large roles in advisors’ transitions, according to Papike. Staff cutbacks and inadequate levels of expertise among the corporate office teams working with the advisory practices have advisors “pulling their hair out across the industry” as part of “a really big theme that I’ve been hearing” from departing teams, she noted.
The consolidation in wealth management brings healthy retention offers from the buyers and substantial competing deals from their rivals. But M&A also frequently delivers changes that are completely out of advisors’ control, which helps explain why their movement has “definitely ramped up over the last five years,” Papike said.
“There’s been so much change, so much disruption and so much activity and the impact of that falls directly on the advisor,” she said. “It’s just a huge disruption in general, and we’ve seen so much of that in the last five years.”
READ MORE: How financial advisor compensation is crucial to succession and M&A
Think but don’t overthink
In that murky picture, some advisors may undertake the effort to switch firms, only to find that they wound up in the wrong place. Avoiding that scenario looks different for every advisory practice in the industry.
At SageSpring, the team led by Dobyns found its prior legacy technology to be “a very tough hill to climb and to fix” in a competitive industry, he said. So they set out to find a new service provider. In general, there is “too much fear about making a change,” even though no advisor wants to switch firms overnight, Dobyns said.
“It’s obviously critical to do your due diligence and your homework, because it’s a huge move, and you want to be sure that what you’re getting into is what you think you’re getting into,” he said. “You want to be sure that you’re doing what’s best for your clients and your team.”
