Aggressive hiring by regional broker-dealers is likely to continue for the rest of the year, coming mostly at the expense of the wirehouses, according to industry executives and analysts.
Aggressive hiring by regional broker-dealers is likely to continue for the rest of the year, coming mostly at the expense of the wirehouses, according to industry executives and analysts.
“There is so much disarray at the large wirehouses, and the regional brokerages are a very natural place for those advisers to go,” said Steven Levitt, managing director and co-founder of Park Sutton Advisors LLC in New York. “The regional firms have scale and capital, their reputation isn't tarnished, and they seem very stable.”
Janney Montgomery Scott LLC, for example, hired 95 advisers in the first half of this year, more than four times the 23 it hired in the first half last year. The firm hired 53 advisers for 2008 as a whole.
Philadelphia-based Janney Mont-gomery has 870 advisers managing a total of $43 billion in assets.
Jerry Lombard, president of the firm's private-client group, cited Janney Montgomery's platform and its stability — it is owned by The Penn Mutual Life Insurance Co. of Philadelphia — as two reasons that the firm is attracting talent.
Ninety percent of Janney Montgomery's new hires this year came from wirehouses, he said.
“The wirehouse model is not working for advisers anymore. Regional firms are all picking up market share,” Mr. Lombard said.
In fact, a report released last month by Aite Group LLC of Boston noted that wirehouse firms lost 2.1 percentage points of market share last year. Their share fell to 38.8% of total client assets of $10.8 trillion, the company said.
“It's going to continue. More advisers will move, and a lot of assets will be leaving with them,” said Alois Pirker, a senior analyst at Aite.
PLAYING CATCH-UP
“Many got the message that they are not top producers at the wirehouses and will look for firms where they can be top tier. The regionals see this as an opportunity to catch up with the wirehouses,” Mr. Pirker said.
Recruitment firm executives cited the surplus of talent in the marketplace, especially for brokers with a book of business of $500,000 or less, as a major reason that regional firms have been able to scoop up so many recruits without having to offer lavish packages.
“Smaller circumstances in today's world are more comfortable for a lot of people,” said Louis Burnett, a managing director for RSR Partners, an executive search firm in Greenwich, Conn.
Robert W. Baird & Co. Inc., which set an internal record by hiring 77 advisers in the first half of this year, up from 59 advisers for all of last year, expects to keep up that torrid pace, said Michael Schroeder, the Milwaukee-based firm's director of private wealth management.
“We expect to attract talented financial advisers and expand into new geographic areas nationally for the rest of the year,” he said.
Baird has 640 advisers and about $48 billion in assets under management.
Meanwhile, St. Petersburg, Fla.,-based Raymond James Financial Inc. added 150 financial advisers in its fiscal third quarter, ended June 30, as part of what the company described in its earnings release as a continuing effort to “add producing personnel of all types aggressively.” That number rose 43% from a year earlier, according to a company spokeswoman.
“We expect this positive recruiting trend to continue for the rest of the year,” said Chet Helck, chief operating officer for Raymond James' private-client group.
However, he added, the trend “will likely slow somewhat due both to the retention programs implemented by the major firms and the major equity markets.”
Raymond James has more than 5,300 financial advisers on multiple platforms and about $196 billion in total client assets.
Adviser erosion at the wirehouses “will continue for years and years,” said Tim White, partner at Kaye/Bassman International Corp., an executive search firm in Plano, Texas.
“It's not that the guys who took retention packages there aren't all looking; it's just that they can look comfortably and may not be in a hurry,” he said.
And jumping from a wirehouse to a regional firm isn't as big a cultural leap as going independent, said Bing Waldert, director of Cerulli Associates Inc. in Boston.
But “regional firms are built around advisers, and large wirehouses are not,” he said. “And advisers are drawn to where they will be the happiest.”
Mr. Burnett, who is based in San Francisco, agrees.
“Advisers who are any good can stand out and excel at a regional firm,” he said. “That's not the case at a wirehouse.”
E-mail Charles Paikert at cpaikert@investmentnews.com.
