J.P. Morgan Securities was the big winner when it came to recruiting financial advisers in the final quarter of 2017, adding client assets of almost $8.2 billion. The firm gained six individual advisers or teams while watching seven move to other firms, according to
InvestmentNews data.
That was the largest recruiting gain of adviser-controlled assets tracked by
InvestmentNews.
Over the final three months of 2017,
InvestmentNews tracked J.P. Morgan advisers who manage $2.6 billion move to other firms, so the firm saw a net gain of roughly $5.6 billion in adviser assets for the quarter.
Other firms that saw strong net gains in recruiting in the fourth quarter included:
Raymond James Financial, also with $5.6 billion in adviser assets; LPL Financial, with $4.2 billion; and RBC Wealth Management, with almost $2.7 billion.
Industry recruiters pointed to J.P. Morgan's willingness to offer large recruiting bonuses to advisers as one large part of its success. Over the past couple of years, wirehouse rivals like Merrill Lynch and UBS Financial Services have announced they were scaling back on recruiting in an effort to invest either in training new advisers or pouring more resources into their current sales forces.
Recruiting bonuses for financial advisers come in the form of forgivable loans that the adviser works off over a period of time, usually seven to nine years for firms like J.P. Morgan Securities. As an incentive to move to a new brokerage, the large firms were offering advisers as much as three times an adviser's annual compensation. The Department of Labor's fiduciary rule, which sharply curtails conflicts of interest for advisers, caused firms to curb those bonuses.
J.P. Morgan Securities "decided they wanted to start recruiting, and decided to start to writing deals," said Casey Knight, executive vice president and managing director at ESP Financial Search, a recruiting firm. He added that he recently moved a Wells Fargo Advisors team with $2 million in gross annual revenue to J.P. Morgan.
The firm's recruiting bonus is in the neighborhood of three times an adviser's annual revenue, known as production in the industry, he said.
"The deal is just like the old days, with [150% of annual revenue] upfront and a bunch of back-end bonuses, but they can be hard to reach," Mr. Knight said.
A spokeswoman for J.P. Morgan Securities, Kaitlin Finnerty, did not respond to questions about the firm's current recruiting bonus for advisers.
J.P. Morgan also took full advantage of the disarray that occurred in the brokerage industry after Morgan Stanley
dumped an agreement called the protocol for broker recruiting at the end of October.
Morgan Stanley's
exit from the agreement, which essentially makes it easier for a broker to leave one firm to work at another, preceded the largest net decrease of advisers at the firm in 2017. Morgan Stanley lost 47 brokers in the fourth quarter, the same quarter it clamped down on advisers leaving by backing out of the protocol.
Three of the largest five groups of advisers who moved in the final quarter of last year left Morgan Stanley to move to J.P. Morgan Securities, according to
InvestmentNews information. The largest was a team based in New York and led by Colleen O'Colleghan and Norm Thomas; the eight-person team has a combined $2.5 billion in assets under management, according to
InvestmentNews.
In total, J.P. Morgan Securities recruited eight individual or teams of advisers from Morgan Stanley, with $7.5 billion in client assets, during the fourth quarter, according to J.P. Morgan.
A spokeswoman for Morgan Stanley, Christy Jockle, declined to comment.
"When Morgan Stanley left the protocol, it irreversibly changed the culture," said Danny Sarch, an industry recruiter. "Advisers are willing to seek opportunities outside of Morgan Stanley more than ever because the firm ditched the protocol."
