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Looking for Money In Motion? Watch The Movement of Financial Advisors From Firm To Firm

Mike Langford
Feb 20, 2019

This article is the third in a series of “Get Ready to Pounce” themed posts by Truelytics. The goal for this series is to help wealth management firms, broker-dealers, and individual advisors prepare to take advantage of market changes that are likely to occur in 2019 and 2020.

One of the most overlooked money-in-motion events in the wealth management industry is the movement of advisors from firm to firm on an annual basis.

It’s Kind of a Big Deal!

According to Discovery Data, approximately 6.5% of advisors (RR and IAR) make a change of their firm affiliation each year. How significant is 6.5% turnover on an annual basis? Very!

The 6.5% number does not include advisors who have left the industry, newly minted advisors, or (curiously) advisors who took six months or longer to add their new affiliation since breaking with their prior firm.

What this means is that we can expect to see 100% turnover in advisor populations every 15 years or so if we assume the annual rate continues and it may be something closer to 10 years if we include other advisor movements that Discovery Data excluded in their report.

This is hugely significant for an industry where long-term value is built on stability and recurring revenue.

Imagine Losing 6.5% of Your Business Each Year

While it is important to note that Discovery Data’s “Rep Movement Insights” reports do not include any details on the assets or revenue that moved with the advisors who changed affiliations, it’s safe to assume the dollars involved were substantial. Even if the assets-to-rep ratio at a particular broker-dealer, wirehouse, or other firm type losing the advisor isn’t 1:1 that kind of movement will certainly leave a mark.

Advisor retention is arguably more important than advisor recruitment for the vast majority of broker-dealers, RIAs, and wirehouses. When an advisor walks out the door their clients usually follow. They also take years of institutional knowledge, established brand identity, and a bit of your reputation with them. If other advisors follow their exit it can have the effect of rattling the rest of your advisor population.

Keeping advisors happy in today’s competitive market requires more than the standard suite of practice management offerings and performance bonuses. Advisors want control over their futures and the ability to see what that future looks like. Firms that show their advisors how to improve the value of their business and lock in a plan for succession within their firm’s ecosystem will greatly reduce advisor attrition.

Look at All The Business Up for Grabs!

According to the 2017 Rep Movement Insights report, over 59,000 advisors changed firms that year alone. When you see that number it’s easy to imagine one of those money booths where you have 30 seconds to grab as much of the cash flying around as possible.

Every year there are 45,000 to 60,000 advisors making a move and thousands more who will exit the business. That’s a lot of business up in the air. How well is your firm positioned to grab your share?

As I mentioned in the first “Get Ready to Pounce” article, fortunes are made in times of great disruption. The trend of advisors jumping from wirehouse to independent and from independent to RIA models has shown no sign of slowing down. And firms are rolling up to create larger broker-dealers and RIAs while robo-advisors and flat-fee subscription models are gaining some early traction.

Now is the time for you and your team to make a run. First, make sure your firm is an attractive landing spot for advisors on the move. Go deep on your eValuation scorecard to see how your firm compares with others who might be competing to win advisors on the move. Remember, advisors, like clients, have options as to where they bring their business.

Consider Adjusting Your Model

Lastly, the Discovery Data report shines a pretty big light on the changes that are likely necessary for many firms. The wirehouse and insurance models have experienced large net losses in their rep populations over the past several years. RIAs saw huge net gains in advisors from other firms and independent broker-dealers saw solid gains as well. However, IBDs lost more advisors to RIAs than they netted in total.

Does this mean that everyone should just convert to an RIA model and call it a day? Of course not. But, you should give strong consideration to what the future of the industry looks like and what models advisors are finding most attractive.

What Are You Seeing In Your Business?

Looking back over the last several years what kind of advisor movement have you seen in your business? Have you experienced a net gain or loss in your advisor population? How has it affected the business? What changes have you made to adjust?

We would love to hear from your thoughts and see how we can help you grow. Drop us a line here to set up a call.




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