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“There’s been some of the largest-ever transitions away from wirehouses this year. What’s notable is most of those groups were lifers at their firm. They weren’t people that jumped around a bunch. They had some of the best reputations. And kind of what their move means that it’s more symbolic. The sheer scale and sizes of groups is pretty remarkable,” says Louis Diamond, executive vice president and senior consultant at Diamond Consultants. “I think, overall, the average transition is probably larger than in years past, although the number of moves is seemingly a bit down.”

That has benefited some of the larger broker-dealer firms.

“Historically, we have won with advisors who have less than $100 million in AUM, but you’ve seen us, even in the last 45 days come out with multiple teams that are above a billion dollars in AUM. And so we are increasingly seeing that larger advisors are joining our firm and putting us in consideration,” says Rich Steinmeier, managing director and divisional president of business development at LPL Financial.

LPL saw a net addition of 80 advisors in Q1 2019 and net attrition of 28 advisors in Q2, bringing the number to 52 for the first half. The number for the second quarter was impacted by Independent Financial Partners breaking away in May of this year.

“The books and businesses are definitely, markedly higher. The production is much higher than we’ve seen in the past, assets are much higher,” says Manish Dave, senior vice president of business development at Ameriprise Financial, adding that that larger teams transitioning from wirehouses is symptomatic of what he calls “wirehouse fatigue.”

“Advisors feel like they’re being treated like a resource. And like anything, whether it’s in life or business, when you treat something as a resource, you exhaust it, you deplete it, you leverage it, you put it to work for your own benefit. And advisors are feeling like a resource at many, many firms in the industry,” says Dave.

Ameriprise saw its advisor ranks shrink by 28 advisors in Q2 but given the net addition of 48 advisors in Q1 2019, the net addition for the first six months was 20 advisors. Despite the drop in numbers for the past quarter, the firm insists it is hiring larger producers.

Is the dam about to break?

While the movement of larger teams is a noticeable trend, it’s not quite bursting the floodgates just yet.

“As a percentage of the larger teams out there — let’s say $2 billion teams — it’s still small, [a] very small percentage that move on. But where you rarely, if ever, saw that level of person move, now you see it more often than before. It doesn’t mean that it’s [the] predominance of moves, it’s still relatively rare. It’s just that it never used to happen. Now, it’s happening more often,” says Danny Sarch, recruiter and president of White Plains, N.Y.-based Leitner Sarch Consultants.

Not all firms covet larger teams. Katherine Mauzy, principal of financial advisor talent acquisition at Edward Jones, says the firm focuses on hiring solo practitioners with the intent of growing their business.

“We don’t recruit big complex teams. We think it’s incredibly important in our business model that you can grow your practice,” says Mauzy. “It’s a very different model than the big vertical or horizontal teams that have multiple producers.”

Edward Jones saw its advisor headcount increase by almost 559 advisors for the first six months of the year, though Mauzy says close to 159 of those were experienced advisors the firm lured from competitors.

So, if advisors are leaving wirehouses, where are they headed?

Diamond says larger teams are often headed to high-end boutique firms such as Rockefeller Capital, First Republic Bank and JPMorgan Securities, driven by a less-bureaucratic and more bespoke advisor experience as well as aggressive recruiting deals.

Among the regionals, he thinks Stifel and Raymond James are the big winners.

“Stifel and Raymond James are crushing it. Their wins are all over the map in terms of the size of the teams. I would expect, they’re probably up there in terms of advisor head count numbers. They’ve had some big moves between them, but for the most part, they’re kind of the mid-range in terms of the average size of the team that they’re recruiting over,” says Diamond.

Stifel saw big recruitment from Merrill Lynch, according to the firm’s head of recruiting, John Pierce.

“This year, we’ve seen a significant increase in large Merrill Lynch teams, based on primarily the compensation policies, and other things that the bank is kind of foisting upon Merrill Lynch FAs. Last year, Wells Fargo was the firm we hired the most from. So far this year, it’s Merrill Lynch, closely followed by Wells Fargo,” says Pierce.

Wirehouses were also the primary source of recruits for Edward Jones, says Mauzy.

“The bulk of our hires are coming from wirehouses,” says Mauzy, not naming any firms but referring to one of the larger firms that has seen “a lot of attrition” and “press mentions.” She does add that the pressure to cross-sell may be a reason why advisors chose to move.

“I think the pressure to cross-sell is not appealing to a lot of financial advisors, and they just want to be in an environment where, you know, they can do what they believe is right for their clients.”

Where the big names are (and where they’re going)

Wirehouse reps transitioning tend to be concentrated in some of the big-name firms, says St. Croix, Minn.-based recruiter Jon Henschen of Henschen & Associates.

“They like name-brand names, your LPLs and Raymond James. Raymond James has been a big absorber of wirehouse reps,” says Henschen.

Jodi Perry, president of Raymond James’ independent contractor division, says the company has typically seen a great deal of hiring from wirehouses. But this year the firm observed another trend as well.

“We’ve seen some small broker dealers who have decided that they no longer want to be their own broker-dealer,” says Perry.

Raymond James saw net additions of 47 and 42 advisors for the first and second quarters respectively, implying a net addition of 89 advisors for the first half of 2019.

The uncertainty over the fate of the Department of Labor’s fiduciary rule had slammed the brakes on recruiting towards the end of 2017 and going into early 2018. The first half of this year saw the introduction of the SEC’s Regulation Best Interest as well as more momentum in certain states looking at their own versions of fiduciary rules.

While most experts feel there has been no tangible impact on recruitment activity just yet, some of that might be visible in the months to come as the rules go into effect.

“We’ve seen some expansion of the pipeline based on folks who are at smaller firms who are unsure as to whether their firms are actually going to be able to make the investments to stay ahead of the regulatory environment. And so that’s where you get this flight to quality and flight to a firm that actually has the capacity to make consistent investments,” says LPL’s Steinmeier.

“As the regulatory environment continues to escalate, and more regulation is coming down the pike, I think that advisors are getting more sensitive to what the decisions are that the firms are making around regulation. So especially as you see, Reg BI is coming down, and some of the states and so on and so forth, I just think you have them looking around at firms that seem to be making decisions that are also taking into consideration how it impacts advisors, and how it impacts their clients,” says Perry.

Why transition assistance became key

At the end of last year, as non-wirehouse firms lured advisors away from wirehouses, it spurred extreme competitiveness when it came to transition assistance.

Diamond says that after almost two years of muted deal structures on account of the uncertainty of the DOL rule, transition deals are now reclaiming highs.

“I think we’ve definitely seen a rebound [with] the addition of firms like Rockefeller that are extremely aggressive on deals. JPMorgan and First Republic also are very aggressive to the right teams. RBC has been kind of a standout with deals. Stifel is competitive and more competitive than usual. Ameriprise and Wells Fargo are probably at their high points as well,” says Diamond.

On the independent side, LPL has done well, says Henschen.

“Part of that is that they’re paying a lot for buying business. Large forgivable notes, but their forgivable notes are very, very specific of what they’re paying on,” says Henschen.

Though most firms do not divulge any plans for tweaking their transition incentive structure, they make it very clear they will be willing to pay the price for the right team.

“We have a number of different economic incentive packages, based on the unique composition of an advisor’s practice or their situation. So, would I expect that we would continue to tweak things and present new opportunities and new offers in the marketplace over the second half of the year? Absolutely,” says Steinmeier.

Dave says Ameriprise “will always get aggressive for the right talent to join our firm.” However, he says the firm is mindful of market dynamics and though they are aggressive, they do not offer special deals on a broader basis but do look at them on a “case-by-case basis.”