2023 Advisor Recruitment Trends Show Vitality Amid Unexpected Obstacles

Macro Volatility And Regional Banking Crisis Add X-Factors To Otherwise Robust Financial Advisor Recruitment Landscape For RIAs And Broker-Dealers

Larry Roth, CEO, Wealth Solutions Report

Several notable trends in wealth management recruitment have emerged over the course of the past year, a couple of which were quite unexpected. The good news is that industry recruitments have exhibited healthy signs despite various macro headwinds.

In the aftermath of the rapid-fire failures in March of the regional Silicon Valley Bank and Signature Bank in the U.S., and the bailout of much larger global bank Credit Suisse by the Swiss National Bank, First Republic Bank experienced massive deposit outflows and ultimately  the U.S. government seized First Republic and sold it to JPMorgan Chase.

Rob Sechan, CEO and Co-Founder, NewEdge Wealth

This led to First Republic losing teams of financial advisors to Morgan Stanley, RBC Wealth Management, Rockefeller Capital Management, NewEdge Wealth, Cresset Asset Management and others in exits representing more than $33 billion in client assets. SVB also saw advisors leave with billions in assets to firms such as Cerity Partners and Cynosure Wealth Advisors.

Speaking in June about the opening of New Edge Wealth’s newest office and the recruitment of former First Republic wealth manager John Froley as the first advisor there, CEO and Co-Founder Rob Sechan said, “The changing San Francisco market presents an incredible opportunity for NewEdge Wealth to serve a dynamic client base in need of bespoke wealth management services, and John’s experience in the region makes him the perfect person to lead our expansion in the Bay Area.”

RIA & IBD Success

However, separate from the banking crisis, many RIAs and midsize broker-dealer networks racked up key recruitments. For example, so far this year, tru Independence partnered to help launch the firms SYKON Capital, Gainline Financial Partners, Seven Mile Advisory and Crossover Capital Advisors, representing over $2 billion in assets. Rockefeller recruited Ladage, Smith, Garcia Wealth Partners from UBS in January as well as Giorgetti Wealth Partners from Brown Brothers Harriman in June, representing nearly $3 billion in assets.

Atria Wealth Solutions recently saw its CUSO Financial Services subsidiary recruit Capital Credit Union, Allegent Community Federal Credit Union, Clearview Federal Credit Union, Harvard University Employees Credit Union and Mobiloil Credit Union as well as recruit an advisory team to its Cadaret Grant subsidiary, representing approximately $7.5 billion in assets.

Brian Bichler, Co-Head of Financial Institution channel, Atria Wealth Solutions

“We work diligently to create unique experiences for each of our financial institutions and Clearview is no exception,” said Brian Bichler, Co-Head of Atria’s Financial Institution channel. “From the beginning, our focus has been to understand their vision and challenges, and then develop a customized approach which includes an in-person training initiative, specialized support and smart, seamless solutions proven to enrich the financial professional and member relationship.”

At the start of the year, IBDs and multichannel firms reported impressive full-year 2022 tallies. Osaic (formerly Advisor Group) recruited nearly $21 billion. Cetera Financial Group recruited over $13 billion. Commonwealth Financial Network recruited $11.24 billion across 270 advisors. Kestra Financial recruited $8.5 billion and 80 financial professionals.

Kristen Kimmell, Executive Vice President, Business Development, Osaic

LPL Financial recruited a whopping $82 billion in assets and increased headcount by 1,399 advisors. Raymond James did not break out 2022 full-year recruitment gains, instead reporting that its net new assets for the Private Client Group also increased by $82.1 billion and that PCG added 235 financial advisors to the total headcount.

“The pursuit of scale to drive continuous reinvestment in advisor growth resources in a fast-consolidating industry, while important, isn’t sufficient by itself to get recruits of all sizes to where they want their businesses to be,” Kristen Kimmell, Executive Vice President, Business Development at Osaic, told WSR back in September.

“Yes, our professionals are looking for strength, stability, expertise and scalable digital solutions to take their businesses to the next level,” Kimmell said. “But they’re also looking to balance these features with a truly personalized service experience. We’re one of the few large firms that can deliver on this promise.”

Recruiter Insights

According to the Diamond Consultants 2022 Advisor Transition Report, more than 9,000 experienced financial advisors changed firms last year, averaging 750 moves per month, out of the approximately 300,000 total advisors that Cerulli estimates are in the U.S. Firms with multiple channel affiliations experienced outsized success relative to their peers, while the most common moves were intra-channel including wirehouse-to-wirehouse transitions, Diamond Consultants found.

As for recruitment packages, it’s become common in the independent space to see anywhere from 35% to 100% of an advisor’s gross dealer concessions (GDC), while in the W2 employee space baseline deals can yield 300% to 400% of an advisor’s trailing 12-month-production including upfront amounts and backends, according to Diamond Consultants.

But to shed light on what’s been driving the successful onboarding of advisors in the first half of 2023, see a recent blog post by Terrana Group titled “Myths & Misconceptions About Financial Advisor Recruiting,” which focuses heavily on the advisor’s priorities.

It begins by arguing that strong recruitment candidates possess the qualities necessary to excel in a given role – in other words, “fit” – and that exceptional advisors possess interpersonal abilities, analytical prowess and adaptability to changing market dynamics. Meanwhile, according to Terrana Group, these advisors must evaluate company culture for work ethic, communication styles, sustainability, DEI initiatives and approach to teamwork.

Terrana Group insists that, in addition to financial compensation, many advisors change firms for a more supportive work environment, professional growth opportunities and a healthy work-life balance. Therefore, the blog suggests, firms seeking to recruit top advisors should commit to ongoing development, book buying and succession opportunities, teaming and mentorship programs.

The blog also urges advisors to consider all channel options: the traditional employee or wirehouse model, a traditional independent platform, completely owning their business, or going with a turnkey RIA or hybrid solution.

“Building strong relationships and delivering on both the client and candidate side of the equation are crucial for scaling sustainably and meeting the evolving needs of all involved,” according to Terrana Group.

Macro Environment

Finally, in a year defined by intense inflation, sustained Federal Reserve interest rate hikes, stock market gyrations, persistent fears of an imminent recession amid U.S. debt ceiling brinkmanship in Washington, as well as alarming geopolitical tensions with Russia and China, the macroeconomic impact also is relevant to wealth management recruitment trends.

The more uncertain the investment landscape, the more financial advisors are likely to reassess their current resources and explore ways to improve them. This is especially the case when clients start asking tough questions. Would a potential economic downturn hurt the portfolio? Is it time to hold more cash, or instead buy into an artificial intelligence company? Can the advisor access alternative investments to address these risks and opportunities? And so on.

Craig Clark, Chief Marketing Officer, Nitrogen

Naturally, advisors will turn to their firms in search of swift and effective support to help them satisfy jittery clients and maintain the growth of their practices. Depending on the specific queries, support could come in the form of client educational materials, market intelligence and data analysis technology, financial products, compliance approvals or something else altogether. Advisors who don’t get the support they need in-house, and feel their firm is not helping them grow sufficiently, will start looking elsewhere.

“The harsh reality is that the majority of wealth management firms did not grow organically over the last 12 months, and market volatility has compounded the challenge of growing a firm,” Craig Clark, Chief Marketing Officer at Nitrogen, said in May, speaking about its 2023 Firm Growth Survey.

“The reality is the majority of firms are not growing like they should. There are major risks to not growing such as stagnating revenue streams, decreasing firm valuation and advisor attrition,” according to Nitrogen’s survey. Yet, the survey notes, “Great firms are growing in the double digits and that allows them to invest in their staff, grow their valuation, and most importantly, expand their impact on their clients.”

Larry Roth is CEO of Wealth Solutions Report and Managing Director of RLR Strategic Partners.

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