Business Development Leaders Discuss the Possibility of an Uptick in Year-End FA Movement Between Firms – And What They’re Doing to Capture Market Share
The past 17 months have defied expectations among many industry pundits about wealth management recruiting – Including across independent dual registrant firms and hybrid RIAs.
When the pandemic first hit our shores, the freeze in business activities across the board that happened in March and much of April was feared by many in the wealth management industry to be the new normal for many more months to come. But instead…the industry adapted.
Not only did advisor recruiting rebound by May and June of last year, the financial advisor recruiting market has remained robust since then.
All of which underscores how the broader dynamics of the recruiting landscape can be mystifying, to say the least.
To provide readers with more opportunities to hear directly from business development leaders about the most important advisor recruiting trends – and how these trends could affect their businesses – WSR asked me to launch the publication’s Recruiting Roundtable.
Each month, I’ll bring together two to three in-house business development or recruiting executives from across the universe of wealth management firms to address a hot button recruiting question.
The goal of each Recruiting Roundtable, consistent with WSR’s mission, is to deliver actionable insights and analysis from industry leaders for industry participants.
This Month’s Recruiting Roundtable Participants
For our inaugural Recruiting Roundtable, we’re privileged to have the following participants with top dual registrant firms share their thoughts with us:
- Becca Hajjar, Senior Vice President, Field Development at Commonwealth
- John Pierce, Head of Business Development at Cetera Financial Group
- Scott Posner, Executive Vice President, Business Development
Without further ado, here’s the question for this month’s Recruiting Roundtable:
Do you think there will be a significant uptick in year-end financial advisor movement between firms, and what are you doing to capture market share?
Becca Hajjar, Senior Vice President, Field Development at Commonwealth:
At Commonwealth, we don’t anticipate an increase in year-end advisor movement. COVID-19 is still a factor, and it has changed and slowed the recruiting process, affecting every firm’s ability to create a strong relationship between prospective advisors and their potential RIA–broker-dealer partner. On the plus side, video conferencing has taken the place of long phone calls, which allows for more transparency and direct communication.
In addition, over the past decade, the “time to close” has increased. The due diligence process – for the thoughtful advisor – takes longer and is more complex. At Commonwealth, where our focus is on higher-end producers, they often bring more complex needs. As “career fiduciaries,” we pride ourselves on crossing every t and doting every i before bringing them on. This has proven time and time again to be a recipe for success.
Moving forward, we are diligently focused on what we can do differently to get in front of prospective advisors through year-end, with the expectation that this work will fuel conversion in 2022 and beyond.
We are in the process of doing the following:
- Building out our Field Development and Transition team and department infrastructure.
- Optimizing our CRM capabilities with the implementation of a new platform to better manage the entire sales funnel from lead to onboarded advisor.
- Increasing content delivery to the marketplace to increase awareness of Commonwealth, leveraging a greater variety of digital channels with targeting capabilities.
- Improving our breakaway advisor offering by simplifying our economics, increasing forgivable loans, and creating real infrastructure to support advisors as they shift from employee to entrepreneur.
- Carefully positioning a concept we call “glide path” that addresses advisors who ultimately want to go fee-only but aren’t ready to transition to that model yet – We have a program at Commonwealth that allows us to bring them on as dually registered advisors and then support them through the change to fee-only without altering their underlying infrastructure.
All of this is happening – as is much at Commonwealth – as an investment in our future success. We aren’t looking for an immediate payoff but a quality one.
John Pierce, Head of Business Development at Cetera Financial Group:
We have seen a pick-up in independent representatives that are changing affiliation relationships based on two key criteria:
- What resources can you provide to help me grow? Specifically, marketing, technology and social initiatives.
- What firm can grow my enterprise value over time so that I can maximize my eventual exit?
Additionally, we have seen a surge in wirehouse and regional representatives that have accepted the reality that they have become independent due to COVID-19 and there are no legitimate reasons to pay 50 cents on the dollar for bloated corporate overhead. At Cetera we have entities to tuck in if you want direct affiliation, tie into a Super OSJ, connect with a tax practice, or align in a W-2 like model while remaining 1099.
I also have some words of caution to share:
- The implementation on 21-09 will have a chilling effect on the industry. While Notice 21-09 has a five year look back, implementation will stall movement and will create confusion for representative that are looking to move. This is a significant FINRA Notice and if firms you are looking at sweep the notice “under the rug,” beware of their sincerity and credibility.
- “Home State Registration” is needed to remain in business, and we have seen meaningful delays in state registrations due to under-staffing, and, more importantly, scrutiny of past regulatory actions. While 21-09 does not cover some issues like tax liens, we are seeing national and local regulators look back at past activities up to 30-years ago. This is a word of caution that may stall movement. We would encourage every financial representative to consult with external legal counsel if you have had past regulatory or disciplinary action.
In terms of what we’re doing to capture market share, Cetera remains laser focused on high quality financial professionals that have a robust mix of advisory and brokerage business.
Cetera is not chasing “all assets at any cost” like many. We are recruiting teams and families that want to build their enterprise value, for a cohesive liquidity strategy to exit the business, and implement growth plans to enhance that enterprise value before an exit.
Unlike our competition, we do not push “direct affiliation” at all costs. While that is an option, we have multiple communities to tuck in as a “break-away-broker” for a soft landing for not only regional and wirehouse financial professionals, but independent representatives as well.
Scott Posner, Executive Vice President, Business Development at LPL Financial:
There is a rush to quality underway. We’ll continue to see momentum in advisor transitions through the end of the year, as many advisors have waited for a more stable environment to make their move.
This churn will likely be noticeable, in particular, for wirehouse and regional firms: Advisors are asking themselves why they are paying more and receiving less, especially when the benefit of a branded office has been mostly off the table since March 2020.
To capture these advisors in motion, we are focused on providing a full ecosystem of business options – including traditional independent advisor relationships, a W-2 employee model, and custody services for RIAs – as well as support services that meet them where they are and help get them where they want to be.
Advisors deserve a partner that lets them do what they do best, and at LPL our only job is to make their jobs easier. In order to help advisors compete in this time of change, LPL continues to invest over $1 billion each year in key areas like technology, workforce, and growth capital that will support advisors’ long-term goals and client needs.
Jeff Nash, CEO of BridgeMark Strategies, moderates WSR’s monthly Recruiting Roundtable. He can be reached via email@example.com