Recruiting Roundtable: Will Rising Rates Alter Your Recruiting Prospects?

Inflation nowadays is like a balloon – getting fuller and fuller.

Ameriprise, Atria and Cetera Executives Provide Perspective on How Rising Rates Affect Recruitment and How to Look Beyond Rates for Long-Term Strategy 

The Federal Reserve has begun its fight to tranquilize rising inflation. After first winding down trillions in asset purchases, it raised interest rates for the first time in three years Wednesday. 

A hawkish Fed has massive implications for the industry. Not only do higher rates impact how advisors work with clients, but they can influence the everyday business of running a firm. 

But how do rising rates impact recruiting and transitions. I spoke with three leading wealth management executives to gain a better understanding. 

While each has a different perspective, as a group they provide a wide window into the future of recruitment. 

Brady Clemons, Vice President of Experienced Advisor Recruiting, Ameriprise Financial

I asked a simple question: How will firms’ recruiting strategies change as Fed rates increase?

Clemons, Ameriprise Financial

Advisors who are exploring a new partnership have seen one of the best environments to move on record: a soaring stock market, stiff competition in the marketplace creating highly competitive recruiting packages and client satisfaction at an all-time high. 

Successful advisor partnership: Moving forward together despite all the economic challenges.

Ameriprise’s Investment Research Group predicts that the Fed will raise interest rates four times in 2022. Because of this, advisors should prepare to see two changes in recruiting strategies: 

Intense focus on how firms can help advisors grow: Since March of 2009, advisors have seen their book grow, in large part due to one of the longest bull markets on record. When the Fed raises rates, we often see markets move lower, which will directly affect the advisors that have not been acquiring new clients to grow their business. 

Advisors looking to grow should consider the resources and commitment firms provide to support growth organically and through practice acquisitions. At Ameriprise, we have a proven strategy, called the Ultimate Advisor Partnership, which helps advisors scale their businesses, deepen client relationships and drive referrals. 

Firms with excess capital versus firms that are highly leveraged: Firms with large amounts of cash may use a down market as an opportunity to increase their market share. With short term rates on the rise, strongly positioned firms may see more flexibility in product economics and may actually increase their deals. 

Are you a talented and entrepreneurial-minded advisor? We want you!

On the flip side, firms that are highly leveraged may have less access to capital, less ability to recruit, may not be able to invest in the advisors that they partner with and could be a net loser in the fight for top talent. 

After working at Ameriprise for more than 15 years, I can say with confidence that our doors are always open to talented, entrepreneurial-minded advisors, no matter the market conditions. 

While the Fed funds rate will play a role in the recruiting environment this year, advisors still have an abundance of choice when it comes to their long-term partner. Advisors considering a move should pay close attention to how recruited advisors fare at a firm years after making their transition. Are they growing organically? Did their recruiting deal help build out the practice they want? Are they delivering more for clients?

Kevin Beard, Chief Growth Officer & Founding Partner, Atria Wealth Solutions

Beard, Atria Wealth Solutions

Let’s start with one key fact of life in our industry: A successful and sustainable recruiting strategy is based on a firm’s value proposition and not dictated by monetary policy shifts, economic cycles or market volatility. 

Sure, Fed Chairman Powell’s recent pronouncement on rising interest rates will have significant impacts on financial markets and firm balance sheets (if they come to pass). But big picture, interest rate changes will have a relatively minor impact on recruiting strategies. 

To be clear, an increase in fed funds rates should positively impact gross margins, resulting in greater working capital for firms with strong cash sweep programs. 

At Atria, we aggressively and continuously reinvest capital back into process efficiencies and growth opportunities to elevate the experience of the financial professionals we serve throughout our family of broker-dealers and investment advisors. Having the best possible offering is how we best drive forward our recruiting strategy. 

With this context in mind, heightened market volatility – based on interest rate hikes or otherwise – doesn’t diminish or change our value proposition. It shines a light on it. Financial professionals are looking for a firm with a sophisticated platform that makes it easier for them to do business and serve clients. 

Our vision for wealth management, and our entire organization, is built on offering them the support, technology and resources they need to become the trusted advisor who can succeed in any economic environment. 

Changes by the Federal Reserve usually cause a degree of volatility, so financial professionals need to maintain a discerning eye on portfolio construction. As the markets move, investors will likely engage in a flight-to-quality. 

We are here to support you.

But this renewed interest in quality will not end with changes to asset allocation, it will extend to those providing the advice. Investors often use times like this to upgrade their financial professionals by aligning themselves with someone who has the expertise and integrity to guide them through uncertainty. 

Those high-quality financial professionals are the ones we target through our recruiting efforts – the ones who are eager to do better for clients by taking full advantage of every resource their firm has to offer. That’s why our entire focus at Atria is to provide the financial professionals throughout our organization with everything they need to offer the expanded advice clients deserve. That’s our commitment, and it doesn’t change with interest rates. 

Pierce, Cetera Financial Group

On Recruiting Movement: 

John Pierce, Head of Business Development, Cetera Financial Group

Rising rates and less probability of a soft economic landing will drive market volatility. As those of us that have been in the industry over 20 years know, financial professionals tend to make transitions during times of volatility to either capture the upside of their high-water mark in production or to recapitalize their business due to a downturn. 

Think back to the recruiting surge that occurred between 2000 and 2002 after a weak recruiting year in 1999. What changed? The volatility.

Rising rates can also provide hardships to smaller broker-dealers. Larger firms capture the upside of the net interest margin (NIM), which is a measurement comparing the net interest income a financial firm generates from credit products like loans and mortgages with the outgoing interest it pays holders of savings accounts and certificates of deposit. 

Smaller firms that do not have significant cash holdings do not reap the benefits of rising rates.  The increase in NIM allows larger broker-dealers to reinvest, while smaller broker-dealers have to manage higher debt costs with minimal offset from increasing NIM. 

These smaller broker-dealers have a more difficult time investing in their tech stack and face increasing regulatory and compliance costs associated with volatility. As these smaller broker-dealers fall behind, financial professionals leave and many broker-dealers are sold at a discount to larger competitors. 

On Recruiting Transition Compensation:

Firms that are behind in recruiting increase transition compensation deals that make limited sense in terms of profit and loss, but they do it to acquire new assets and plug leaks due to high attrition. We saw that in the fourth quarter with competitors of Cetera offering 100% upfront in a “blue light special” if the recruit joined before the end of December.  

We saw mega firms paying 65 basis points for dead assets that will never turn a profit. We saw new entrants offering 75% upfront without asset verification or a quality check of the production.  

Desperate firms, or firms that are focused solely on recruited assets, regardless of quality, will always print the biggest deal. The problem is that once you cash the check, you have to work there.

Quality is the result of intelligent effort.

An increase in the NIM for larger firms will allow them to adjust their economic models. They may be able to offer more for the same set of assets as their economics improve thus enhancing deal terms.

There will be two key trends, I predict, as we see rates increase:

Prove it Deals. You will see an increase in back-end deals for asset realization. Firms will pay up, but only when assets transition to the gaining firm, especially in advisory platforms.

Jeff Nash, CEO, BridgeMark Strategies

Quality Matters. Firms will wake up and decide they don’t want to pay for dead annuity or insurance assets, and they don’t want to pay for low profitability direct or TAMP assets. Deals will increase for recurring advisory assets. You may see an increase in compensation for brokerage assets. Why is that? When volatility increases, brokerage assets trade more thus generating greater production and profitability for the gaining firm. 

Jeff Nash, CEO of BridgeMark Strategies, is Chair of WSR’s Recruiting Roundtable.
BridgeMark Strategies is a nationally recognized advisor recruiting, consulting and M&A firm. He can be reached via

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