After 20 years of working within the strict confines of a bank trust department, adviser Robert Kaercher was ready for a change.
After 20 years of working within the strict confines of a bank trust department, adviser Robert Kaercher was ready for a change.
“I did consider going out and setting up my own firm, but I decided against it,” he said. “Running my own business wasn't going to be all that attractive to me.”
Instead, in February, he left Wells Fargo & Co. and joined Smith & Howard Wealth Management LLC.
“It made a lot more sense going to an established firm,” Mr. Kaercher said. “[Clients] are very cautious, especially in times like these.”
Increasingly, financial advisers who move to an independent advisory platform from traditional firms are, like Mr. Kaercher, joining established firms, industry observers said.
At Schwab Advisor Services, The Charles Schwab Corp.'s custodial unit, 44% of the 54 advisory teams the firm has brought in this year through May joined existing advisory firms.
By contrast, in the first quarter of 2009, just 35% of Schwab's recruits could be classified as “joiners,” or “tuck-ins,” as they are sometimes called. But by the end of last year, the percentage was 42%.
Schwab spokeswoman Alison Wertheim said that the increased number of joiners seems to be a consistent trend.
Other firms see the same thing.
Fidelity Investments doesn't track the percentage of joiners among its registered investment adviser clients or independent-broker-dealer correspondents, but spokesman Steve Austin said that the firm is seeing a growing number.
Like other firms, Fidelity has set up programs to place potential recruits with firms that might be good matches.
As of late May, 40% of the RIA recruits who joined TD Ameritrade Institutional this year had found places in existing firms, and the trend is tracking upward, said spokeswoman Kristin Petrick.
Likewise, about half the recruits who recently signed on to the investment advisory unit of Raymond James Financial Services Inc. joined an existing firm, said Mike Di Girolamo, the managing director responsible for the custody unit, citing numbers from the firm's fiscal first half, which began last October.
The percentage of joiners has “roughly doubled each of the last two years,” he said.
RBC Advisor Services doesn't track numbers, but of “the people we're talking to now, I'd have to say about 90% are looking at being part of an existing firm,” said Craig Gordon, director of RBC Correspondent and Advisor Services.
“The new breed of adviser looking to go independent is not necessarily the die-hard who wants his own business,” he said.
The trend isn't surprising.
All the custodial firms recruit from the huge pool of potential breakaway advisers employed at wirehouses, banks and other traditional financial services companies. But as a rule, these prospective recruits don't want to run their own shops, said Scott Smith, senior analyst at Cerulli Associates Inc.
“If someone is successful in a wirehouse and is comfortable doing business that way, they don't want to worry about paying the rent,” he said.
Nevertheless, many advisers at traditional firms are interested in going independent, said Frank Shull, chief executive of Lara Shull & May LLC, an advisory firm with client assets of about $800 million.
“It's incredible, the [interest] we have right now from the wirehouse folks” who are unhappy with the consolidation of their firms, he said.
This year, Lara Shull & May picked up five new advisers and $300 million in assets. Three of those recruits came from Morgan Stanley Smith Barney LLC.
“The thing that has made these folks successful is their unique ability to gather assets — not their talent at fixing the computer, paying bills or signing leases,” said Mr. Shull, whose firm is part of Focus Financial Partners LLC.
“They want to pick up their book and go to a better culture, a better environment” for their clients, he said.
It isn't just advisers with smaller books of business who are joining existing advisory firms, Mr. Di Girolamo said.
“In some cases, we see teams with more than $100 million wanting to join existing practices that provide a more turnkey approach,” he said.
AT A "CROSSROADS'
Many advisers are at a “crossroads” between cutting service or culling clients, said Mark Tibergien, chief executive of Pershing Advisor Solutions LLC. As a result, they have to consider joining forces, he said.
Merging with another practice can fill in service gaps and also help in establishing a transition plan, observers said.
All of the advantages that come from teaming up with an established firm appeal to the most likely wirehouse recruit — an adviser who is willing to forgo a hefty recruiting bonus in exchange for going to an independent RIA firm.
Joiners should find plenty of potential homes: Of the 6,600 RIAs for which Schwab provides custody, about 2,000 are actively looking to add other advisory firms or brokers to their practices, said Bernie Clark, head of Schwab Advisor Services.
Smith & Howard, which has $340 million under management, is one of those advisory shops that are looking to hire. Frederick Wright, partner and chief investment officer, is hoping to attract more advisers such as Mr. Kaercher from traditional financial services firms.
“It's so much easier [to run a firm when] you have a lot of backup and support [from] partners,” he said.
And other venues for joiners continue to grow. HighTower Advisors LLC and Spire Investment Partners LLC both are adding offices nationwide.
E-mail Dan Jamieson at djamieson@investmentnews.com.
