One out of every nine brokers and advisers are likely to leave their current employers this year, with almost a third considering the registered investment advisory channel, according to a new survey commissioned by Fidelity Investments’ National Financial clearing unit.
Better pay is the chief motivation for considering a switch, according to the survey of more than 1,200 U.S. investment professionals conducted from Oct. 3 to Nov. 7, one of the most turbulent periods for markets and for the fate of financial service firms. That was followed by a desire for “more independence or freedom” and “better career opportunity” on the motivational scale, according to the survey conducted online by Sancore LLC, a Lexington, Mass. research firm that interviewed a mix of brokers and advisers weighted to reflect the industry composition of wirehouse, regional, independent, insurance, bank and RIA firms.
The percentage of brokers and advisers expecting to move with in 12 months was similar to the results of Fidelity’s 2007 study on job satisfaction, but the number weighing a move to become RIAs more than doubled year over year.
Compensation, not surprisingly, also registered as the greatest barometer of job satisfaction, nearly doubling in importance from the 2007 survey when brokers and advisers cited "work environment" as the chief factor followed by clearing and settlement capabilities and compensation, according to Boston-based National Financial. Work environment and clearing capabilities ranked second and third in the 2008 survey.
Brokers may well have been influenced by the timing of the survey, which was initiated just two weeks after the bankruptcy filing of Lehman Brothers Holdings Inc. and Merrill Lynch & Co. Inc.’s announcement that it would sell itself to Bank of America Corp. Lehman and Merrill were based in New York and Bank of America in Charlotte, N.C.
Brokers specifically said they were less satisfied than the year before with their firms’ payout ratios (down 14 percentage points), compensation plan flexibility and competitiveness (down 12 percentage points) and benefits (down 10 points).
But one thing didn’t change — brokers’ and advisers’ apparently inherent market boosterism. Seventy-five percent forecast that the Standard & Poor’s 500 stock index would rise an average of 15% in 2009, and 90% said the index would at least be flat to positive. At the same time, brokers said they are spending an average of 36% more time this year than last giving investment advice to clients, resulting in portfolio changes by 43% of respondents. About one of every five advisers who made changes moved some assets into safer investments, 14% increased their overall invested asset levels and 7% moved into more aggressive investments.
“Broker optimism for the stock market in 2009 likely is driven by their understanding that some of the worst short-term losses in the stock market were followed by rebounds,” Gail Graham, an executive vice president for institutional products at Fidelity, said in a prepared statement.
RIAs apparently aren’t so bullish. Charles Schwab & Co. said advisers who custody assets with the San Francisco-based firm almost doubled their clients’ cash allocations to 20% in the last quarter of 2008, and TD Ameritrade Holding Corp. said its advisers more than doubled their cash balances at the Omaha, Neb.-based custodian to almost 18% while their fixed-income allocations rose to about 28%, from a typical average of 18%.
Although overall broker satisfaction declined nominally at wirehouses, independent broker/dealers and RIA firms, it went up for brokers who work in banks. National Financial said Sancore vetted responses to ensure their statistical suitability for inclusion in the job satisfaction indexes measured by the survey. On a scale of zero to 10, overall satisfaction registered 6.9 in the 2008 survey, down from 7.3 in the previous year.
