Advisors routinely ask us about the changes we're seeing in the wealth management industry as they relate to advisor movement and deals. Questions like:
- Where are the deals going?
- Which firms are the most successful recruiters?
- Which firms are losing top talent?
- What business models are most attractive to advisors?
And the truth of the matter is that we couldn't find a single source to share those answers on a regular basis.
So we created our own.
The second annual installment of Advisor Transition Report sheds light on important trends in the advisor movement through 2023. Essentially, it's competitive intelligence derived explicitly from raw data analysis, along with insights created for advisors—whether they're considering change or not . Even if you don't intend to change firms or models, understanding key trends around recruitment and transition will help you become a smarter advisor and a better steward of your clients.
Every year, the raw data throws up some notable surprises that we couldn't have realized otherwise. Here are the five biggest surprises we found:
- Hiring grew modestly on a headcount basis – we even saw a lot of multi-billion dollar transitions.
Why it surprised us: Amid incredible stock growth and many advisors enjoying record-breaking success, we might have thought the advisor movement would be in a bit of a tailspin. After all, when councilors are enjoying the status quo, why upset the apple cart? The regional banking crisis could very reasonably have affected the number of advisers making a change – but apparently, it didn't.
Why it developed this way: Because advisors are increasingly oriented for the long term (especially the largest teams in the industry). It is not enough that they feel well served today. They wonder if they are in the right place to maximize the value of their business 5, 10, or even 20 years from now.
- Each channel had a clear winner.
Why this surprised us: We expected large independent firms like LPL and even traditional giants like Morgan Stanley to succeed. However, the relatively small population of advisers at boutique and regional firms – led by Rockefeller, RBC and Raymond James – led us to believe that, based on headcount, these firms would not be meaningful players. We were wrong.
Why it developed this way: Regional and boutique firms are increasingly seen as the perfect middle ground with the scaffolding and support of a traditional electrical house minus the bureaucracy and red tape. And with deals that, in many cases, match or exceed their peers, it's no wonder they've had more success. An interesting and related takeaway: Regional firms moved up the market in a meaningful way, with the single biggest transition in 2023 being a wire move to the region (UBS to RBC).
- Even the “losers” won some.
Why this surprised us: We have the benefit of a first-hand view of the industry landscape and, in our experience, it can seem like some prominent firms never win any significant recruits. For example, Merrill and Edward Jones usually appear on the losing side of titles and rarely seem to be attracting the big fish. But this is exactly why raw data is so critical: press releases and news headlines don't always tell the whole story.
Why it developed this way: There is no such thing as a “perfect” firm. Equally true, no firm is all bad. That's what makes a horse race. Even a firm that many advisors find unattractive likely has a value proposition that will resonate with some in the industry. And we saw that in 2023: The firms that lost the most advisors also won some significant wins.
- Private equity has been slow to understand the wiring puzzle.
Why this surprised us: Private equity has been a significant and visible presence in the wealth management industry for years. Most of the largest and most successful RIAs on the Street are PE-backed. However, these firms have been talking for some time about recruiting direct office advisors (without the temporary step of launching an RIA). We would have expected that with their infinitely deep pockets and exceptional deal-making expertise, they would have already found a way to settle for the wire break. But the movement data show very few such transitions.
Why it developed this way: Maybe we were a little early and 2024 will be the year of the PE-wirehouse recruiting trend. However, these potential deals also have some obvious drawbacks. Namely, an advisor is forced to sell equity at a lower level and they lose a large portion of future options by tying their ship to private equity right out of the gates. Plus, as we've seen several times this year, private equity money comes with a lot of strings and caveats — and advisors know it.
- The increase in transition dollars and support in the independent space did not lead to a flood of breakaway activity.
Why this surprised us: We still saw a lot of advisors leaving a standalone channel for a standalone channel, but the rate seems to be slowing down a bit. And that's counter to what we'd expect because a.) indie firms are offering more transition dollars than ever before, and b) there are so many new and exciting flavors of indie that will support almost any and all all parts of the business that a consultant desires.
Why it developed this way: In part, this is likely a natural business cycle at play. Independence was “all the rage” for several years and continues to be very popular. However, the early movers and shakers have already left the camp, and many advisors who remain in a captive channel simply see themselves as better suited to employee models. And while the growth in transition deals is nice, these deals still don't come close to competing with the 300%+ deals offered by most traditional firms, including wire and regional firms (independent firms offer transition deals that typically range from 30- 100% of an advisor's annual income).
The numbers don't lie when it comes to where, why and how advisors are switching firms. But the gold isn't in the numbers themselves: it's the information gleaned from the trends they represent. Advisors everywhere can benefit from understanding the performance of their peers and their firms. Within each trend lies a key indicator of where the industry is headed, and this knowledge alone helps determine how you serve customers and grow your business today and in the years to come.
Jason Diamond is Vice President, Senior Consultant of Diamond Consultants – a nationally recognized recruiting and consulting firm based in Morristown, NJ that focuses on serving financial advisors, independent business owners and financial services firms.