Loss Of Advisors Starting To Hurt Wirehouses

By Cyril Tuohy

As many as 711 securities brokers who jumped ship to rival firms or started their own business took with them $98 billion in assets last year. This is a sign of just how ferocious the recruitment wars have become, an analysis conducted by Reuters has found.

The report, published earlier this month, found that of the 711 advisors who jumped ship, 391 advisors managing $61 billion came from one of the big four wire houses: Morgan Stanley, Wells Fargo Advisors, Merrill Lynch and UBS Wealth Advisors.

Reuters’ database tracks publicly-announced hires of brokers who manage more than $100 million in assets. The latest figures are as of Sept. 30, 2014, Reuters said.

In a separate interview with the publication InvestmentNews, broadcast on the new outlet’s website, Mindy Diamond, president of the recruiting firms Diamond Consultants, said that the attrition suffered by the large wirehouses had reached beyond the “nuisance and an annoyance” level, and that the big securities brokerages were beginning to feel the pain.

“Within the last five years, the wirehouses talked about independence as sort of a nuisance and annoyance but nothing that bothered them at all, and they talked about the advisors that left as not even regrettable attrition and that it was an advisor they wanted to lose.”

One of the largest moves last year involved the independent advisory firm Winter Park Wealth Group, an advisory headed by Ben Weiner, Michael James Hlavek, Lawrence Marsh III and Daniel Iosue. The advisory left Morgan Stanley for Raymond James Financial Services.

Winter Park Wealth Group, located near Orlando, Fla., managed more than $550 million in assets, according to media reports.

“There is no question they are feeling the pain of the loss of advisors,” Diamond said in the broadcast. “They see it as a credible threat.”

Advisors staying on in hopes that wirehouses will keep advisors from jumping ship with another round of retention packages are going to be disappointed, she added.

Advisors who break away from their large wirehouse parent for smaller, regional firms, or create their own independent advisory, do so because they want more control over managing clients. Big firms are often bureaucratic and have to worry about profit margins.

Diamond said it’s possible that the wirehouses will wake up and offer an omnichannel approach as Wells Fargo has done.

“I suspect it might be a quasi-independent model, more like the old Wells Fargo-Wachovia profit formula. Beyond that, it’s anybody’s guess,” she said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].