August 2014 Financial Advisor magazine
By Dan Jamieson
Independent broker-dealers looking to add new advisors might just want a “Goldilocks” type of market this year—one that’s not too hot, not too cold, but just stable enough to give advisors some confidence to make a career move.
An uneventful market environment could help firms overcome what has so far been an anemic recruiting environment. “When markets are doing decently, reps don’t want to upset their production” by changing firms, says recruiter Jon Henschen of Henschen & Associates LLC. “In a decline, they’re fearful that [client] retention might not be what they want because clients may be upset.”
“It’s hard to recruit right now [when] the market is doing what it’s been doing,” agrees Brad Fay, president of IBDSearch LLC. “There has not been a compelling reason to switch” firms.
But after several good years in the markets, advisors and clients “feel stable, and now might be the time [that advisors] think about” a move, says Scott Miller, president of FirstPoint Partners LLC, a recruiting firm.
LPL Financial added just 53 net new advisors in the first quarter of this year, a relatively slow pace next to the 321 advisors it tapped in total last year and the 505 it recruited in 2012. “The first quarter was more challenging than expected, but the activity for this second quarter has really picked up,” says Steve Pirigyi, executive vice president in charge of recruiting at LPL. “We’re feeling pretty good about this year’s recruitment numbers.”
Strong markets slow down activity, Pirigyi says, and with recruits who have larger and more complex practices, “the sales cycle just gets longer and longer.”
Ameriprise Financial landed 76 new advisors in the first quarter. The firm did not disclose recruiting results for the first quarter of 2013, but brought on 254 experienced advisors over the remaining three quarters of last year. In 2012, it added 382 recruits.
Ameriprise officials were not available for comment.
Cambridge Investment Research officials say recruiting remains steady. The firm has commitments from advisors who have $39 million in gross production. Those are advisors who are “signed up and in transition,” says Cambridge president Amy Webber.
The firm normally gets $50 million or more annually in recruited production. “We’d be surprised if we don’t have a better year than last year,” Webber says.
Raymond James Financial Services isn’t seeing much of a slowdown, either. “We will have the best recruiting year this year since 2009,” says Scott Curtis, president of Raymond James Financial Services. Curtis estimates the firm’s recruited production will be up 20% this fiscal year, which ends in September.
Raymond James doesn’t disclose the numbers of net recruits or recruited assets, but the firm reported 3,288 advisors in the independent contractor unit at the end of March, up by 71 advisors from the same time a year ago. Eighty percent of his recruits come from wirehouses, Curtis says, which is Raymond James Financial Services’ traditional market. The big firms are still a target-rich environment because of “the continued frustration with advisors at those firms who want to run their practices the way they want to,” he says.
Commonwealth Financial Network was on track for about $22 million in recruited revenue through June of this year, says Andrew Daniels, managing principal of business development at the firm. Daniels, who spoke to Financial Advisor in late June, said that if the current pace continues through the second half, 2014 will be “one of our better years in a long time.”
Firms and recruiters in the independent space say they are hearing from some advisors affiliated with firms owned by RCS Capital Corp. (RCAP), which has been a focus of attention ever since its executive chairman Nicholas Schorsch announced last January that he was buying Cetera Financial Group. By adding Cetera and its nearly 6,700 advisors, RCAP is now a major player in the independent channel.
But big consolidations like the one RCAP is now undergoing always cause some advisor movement. Recruiters at independent firms say they haven’t seen much movement out of RCAP-affiliated firms yet, but that’s not a surprise. Advisors tend to see how things work out before jumping ship in the wake of a merger.