Competition for Advisers Heats Up

Brokers are receiving incentives to switch firms, and the independent route is looking more attractive, according to research from Fidelity Investments and National Financial.

The market events of the past months have accelerated the trend of advisers going independent and have intensified the competition among firms for top producers, according to a new survey by Fidelity Investments (which provides services to RIA firms) and National Financial (which provides recruiting services to B/D firms). According to a press release of the survey results, more than one-third (36%) of brokers have recently considered either starting their own firm or joining an independent broker/dealer or registered investment adviser (RIA) firm (see RIAs Don’t Regret Going Independent).

Additionally, 34% of all brokers indicate they have already been offered a sign-on bonus to switch firms. Brokers at wirehouses and regional firms report the highest percentage (46%) of sign-on bonuses. Moreover, 27% of all brokers—39% among wirehouse and regional firms—still expect to be offered an incentive to switch firms within the next month.

“Recruiting top producing brokers is a zero-sum game, which is intensifying as brokers, many of whom would not have been in play a year ago, now consider moving,” said Sandy Metraux, executive vice president, National Financial, in the release. “Broker/dealer firms and RIAs understand that in the current market environment attracting top brokers and advisers can be a critical component to their business growth efforts, as loyal high-net worth clients may often follow their trusted advisers.”

Despite an environment where the majority (69%) of brokers report their firms have been affected by the recent market volatility, with impact ranging from mergers and acquisitions to large-scale financial write-offs, 61% believe that investor confidence in the health of their firm is the same or higher than one year ago. Fidelity said that confidence demonstrates the value of brokers to their customers, and, ultimately, to other firms in this market environment.

According to the survey, brokers believe that—if they were to go independent —60% of their clients, on average, would follow them to their new firm, with 31% saying that they would expect three-quarters or more to follow.

“With the unprecedented events on Wall Street in the past couple of months, we are seeing brokers evaluate the independent model at a very rapid pace,” said Gail Graham, executive vice president, Fidelity Institutional Wealth Services. “For example, earlier this year, we were receiving about four to five visits a week from broker teams. Now we are meeting with significantly more than that. This increase is the result of a combination of factors, such as a dramatic decrease in the value of brokers’ long-term compensation and end investors continuing to express the need for independent, objective advice to help them navigate these turbulent markets.”

The Fidelity and National Financial Broker Attitude Research was conducted online within the United States by Harris Interactive between September 29 and October 8, among 127 producing financial advisers working at national wirehouses, regional brokerages, insurance broker/dealers, or bank broker/dealers.