The number of financial advisers leaving one firm to join another dropped more than 25% during the first half of the year, reflecting advisers' optimism in the state of the U.S. stock market and in the overall health of Wall Street.
Through June 26,
InvestmentNews'
Advisers on the Move tracked 119 advisers and teams of advisers, managing a total of $26.4 billion in assets, who switched firms. That compares with 189 teams managing $53.1 billion who moved in the first half of 2012.
The IN database on adviser movement is not exhaustive, as not all firms report new advisers they recruit and none discloses advisers who leave their firm. However, the data clearly indicate a continuing slowdown in recruitment.
“Movement is down. There's no question about it,” said recruiter Rick Peterson. “Moving is a big deal for advisers and the push-and-pull factors causing advisers to consider a move just aren't as dramatic now.”
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The decline in adviser movement has mirrored the rally in the stock market. Since the end of the second quarter last year, the quarterly volume of assets that has changed firms has fallen to $11.5 billion in the second quarter this year from $28.1 billion. Over that one-year period, the S&P 500 index is up 18.6%.
Paul Santucci, head of national sales at UBS Wealth Management Americas, said his firm has recruited fewer adviser teams this year but noted that the advisers come in with higher-quality books of business. “We've recruited fewer people, but we've brought in about the same amount of assets and revenues as last year,” said Mr. Santucci. “Our retention rates are also as good as they've ever been.”
IN tracked only three teams joining UBS so far this year, bringing $1.1 billion in assets to the firm, while four teams managing $1.4 billion left the firm.
Mr. Santucci suggested that the lull in recruiting across the industry is in part due to the strong stock market. “There may not be a lot of movement now, but a lot of advisers are doing their homework,” he said. “If the market were to back off dramatically, some might decide it's time to monetize their practices with the trailing-12-months' revenues they have.”
Uncertainty surrounding implementation of the Financial Industry Regulatory Authority Inc.'s rule requiring disclosure of recruitment deals is having little effect on advisers, he said. Recruiters had expected the rule would prompt advisers to move before they were forced to disclose the upfront bonuses they receive from their new firms.
Mindy Diamond, president of recruiting firm Diamond Consultants LLC, said market conditions rarely come up as a factor in advisers' changing firms. A much bigger factor is the condition of firms in the market.
“Last year and before that, everyone was in crisis mode. A lot of companies were getting negative headlines, and it was a catalyst for adviser movement,” Ms. Diamond said.
Mr. Peterson also believes that the recovering industry is keeping advisers in the fold. “It's not the condition of the markets that matters. It's the condition of the firms,” he said. “There are fewer scandals and there's nothing broken with any of the large firms now. There's less push factor causing advisers to look for something different.”
Wells Fargo Advisors LLC was the most active recruiter, bringing in 29 new teams managing combined assets of $6.9 billion. On the flip side, it lost $1.6 billion — up 4% from the first half of 2012 — from advisers' leaving. That left it with a net new asset gain of $5.3 billion, making it the only wirehouse to post a positive net change in assets from adviser movement. Still, that total net gain was down 28% from the first half of 2012.
The three other wirehouses have lost far fewer assets from defecting advisers this year. Morgan Stanley's asset exodus was down 40%, UBS' fell 68% and Bank of America Merrill Lynch, which saw a whopping $18.4 billion walk out the door in the first half last year, has lost 74% less this year — or $4.9 billion.
Morgan Stanley, which has been integrating the acquisition of Smith Barney since 2009 and rolling out a new technology platform for its more than 16,000 advisers, has lost the most bodies so far this year. IN tracked the departure of 42 teams managing $9.5 billion from the firm. That is far fewer than last year but still almost twice as much as Merrill, which lost the second-most advisers in the first half. The five largest adviser teams to move this year were also from Morgan Stanley.
Robert W. Baird & Co. Inc., a scrappy regional broker based in Milwaukee, was the fifth most active recruiter in the first half, adding five new adviser teams and $1.4 billion in new client assets.
The average size of adviser practices changing firms has trended down to $198 million in assets under management in the second quarter of this year from $320 million in the third quarter of last year.
