There was a lot of “buying” of financial advisors and wealth managers in 2008-09 by some of the industry’s biggest firms through retention packages, most in the form of forgivable loans over a period of time. [pullquote] time and changing economic circumstances will cost the big banks many of their top performers [/pullquote]
But as the three or four year retention periods begin to expire, advisor loyalty will weaken, and the packages will lose some of their lock-in.
A new report out by Aite Group* predicts a second round of brokers jumping ship as the outstanding balances shrink, making it feasible and attractive to accept fat recruiting packages by rival firms.
High Signing Bonuses Offered
The study interviewed 159 top producers mostly from MSSB and BofA Merrill Lynch who were under either retention deals or sign-on bonuses. Aite Research Director Alois Pirker, states that results of the study suggests that “time and changing economic circumstances will cost the big banks many of their top performers.”
“There are a lot of high signing bonuses, sometimes as much as 300% of annual salaries that some firms are offering to a top performer. These guys are going to look at what is offered and how much time is left on their retention contract and decide if jumping ship is a good deal.”
The improved market makes it more likely that a large percentage of a financial advisor’s clients will follow the breakaway advisor or broker which makes an offer even more attractive.
Among Aite’s findings:
45% of big firm brokers have breakaway plans for the next two years, with more than a 25% chance that they will follow through. A third of advisors at other brokerages expect to leave.
38% of potential firm breakaways say they plan to make a change next year, while 16% expect to move in 2013. One in five wirehouse brokers with contracts say there is a 75% chance they will jump.
Let the Recruiting Wars begin…again.
*Aite Group (Independent financial industry research and advisory firm headquartered in Boston) “ Wealth Management on the Move: The Moment of Truth”