- A year from the pandemic’s start, recruiters tell Insider many advisors are contemplating moves.
- Rival wealth managers are continuing to poach from each other as they bolster their own forces.
- Private equity investments are increasingly a consideration among advisors, two recruiters said.
- See more stories on Insider’s business page.
The perennial and competitive battle for talent between rival wealth managers is set to ramp up, as vaccine roll-outs give financial advisors the confidence to start networking and meeting with clients in person again.
Casey Knight, executive vice president at ESP Financial Search, the financial services-focused unit of Houston recruiting firm Encore Search Partners, expects to see a wave of advisors who contemplated moves in the last year now make the jump as cases of the coronavirus decline and more of the population receives the vaccine.
“I am having conversations with advisors who would probably never have thought to break out of their comfort zones and consider going independent, who are now,” said Jodie Papike, president of Cross-Search, the independent wealth management-focused search firm based in Encinitas, California.
Financial advisor moves come as many are rethinking how their firms are helping them grow or best operate their practices as most have worked from home in the past year and had technology and support from their firms put to the test, recruiters said in interviews with Insider.
It’s a force that is being met by nearly every major Wall Street firm investing in building out their wealth management businesses, too.
While recruiters are seeing elevated activity, advisors’ interest in switching firms is mixed, UBS research analysts said in a report last week. Of 200 US-based financial advisors surveyed in January and February, 68% of respondents said they were likely to stay at the same firm for the next six months. Looking at a longer time horizon, 9% said they were very likely to switch firms in the next 18 months. The analysts found wirehouse advisors tend to feel more open to change than RIA advisors.
A closer eye on what private equity means for the industry
Recruiters said firms across each channel — that is, various models of independent wealth managers and wirehouses alike — are looking to scoop up advisors.
Independent wealth management firms have been known for their aggressive hiring in recent years, especially as private equity investors have poured capital into registered investment advisors (RIAs).
On Monday, major RIA Edelman Financial Engines said the private equity firm Warburg Pincus, an existing investor, has made a new, undisclosed investment in the firm that values Edelman at $7.3 billion. Warburg is now a minority equity owner in the firm, and one of its executives will join Edelman’s board of directors.
Advisors are taking notice. They are considering the significant backing from private equity firms flowing into the wealth management space, said Jeff Feldman, a financial advisor-focused recruiter and consultant who runs Chicago-based Financial Recruitment Partners.
Deep-pocketed investors getting in on the industry are “raising more and more eyebrows, especially from the large wirehouse teams” who may be considering moves to independent players, and could be seen as an incentive for a move to an RIA, Feldman said.
He noted the independent nature of working from home is also giving financial advisors confidence in the idea that they might be able to run their practices as standalone businesses.
“The biggest thing I encourage advisors to do is their due diligence, and make sure their client service can be good,” Feldman said. “At the end of the day, if you take care of the clients, business will follow.”
Papike, of Cross-Search, said she is fielding more questions from advisors about what kind of track record a private equity investment firm has with the companies it has invested in before they shift to a new firm.
“That has created an unknown,” Papike said. “They want to know, ‘What are their short- and long-term intentions?'”
Both Cetera, the firm majority-owned by private equity firm Genstar and Advisor Group, the Phoenix-based wealth management business owned by private equity firm Reverence Capital Partners, are among the firms that are hiring in full force, said Bill Willis, president and chief executive of Los Angeles area-based Willis Consulting.
“A private equity-backed firm like Cetera can give advisors uncommon flexibility and resources for acquisition-led growth strategies,” John Pierce, Cetera’s head of business development, told Insider.
Firms’ recruitment playbooks
Rockefeller Capital Management, the RIA that launched in 2018, is recruiting from Morgan Stanley, UBS, and Merrill Lynch Wealth Management as the New York-based firm poaches teams from those traditional wealth managers, said Willis. Rockefeller is led by former Morgan Stanley and Merrill Lynch executive Greg Fleming.
And wirehouses are doing hiring of their own. Morgan Stanley Chief Financial Officer Jon Pruzan said on the firm’s third-quarter earnings call last October that the firm has become a “destination of choice” for advisors, and that attrition has dropped “significantly.”
Wells Fargo meanwhile operates one of the largest wealth managers but has in recent years lost advisors in droves as the bank faced fallout and severe reputational damage following its far-ranging phony account scandal.
It has not been easy to recruit for the firm, Willis said, but “we feel the ice breaking there” as new outside leadership has taken over and “advisors are now much more receptive to that.”
Kim Ta, head of financial integration at Wells Fargo Advisors, said the firm is focused on “recruiting the best advisors in the industry to Wells Fargo Advisors, whether they are seeking an employee channel or independent.”
“For advisors who prefer to move to a fee-only registered independent advisor (RIA) model, we’re expanding our RIA custody business to serve more advisors in that channel as well,” Ta told Insider.
Rick Rummage, founder and chief executive of the Rummage Group, a wealth management consultancy and recruitment firm based in the Washington, DC area, said he continues seeing heightened interest among advisors for independent wealth management firms and others — “every firm you can name” is hiring, he said.
He noted LPL Financial, Raymond James, Wells Fargo’s independent financial advisor arm known as FiNet, and Cetera are among the firms that are more aggressively taking on advisors.
Fira Yagyaev, principal consultant specializing in private banking and wealth management at Selby Jennings, said a range of smaller, boutique wealth firms are looking to grow their ranks now, including family offices.
Meanwhile, Merrill Lynch has in recent years backed away from hiring experienced financial advisors — who often command hefty signing bonuses — and has instead focused heavily on training up advisors in-house.
Four out of five advisors who left Merrill Lynch for a competitor in 2020 had been recruited into Merrill from a different firm, a senior executive said on a call with reporters in January.
“In other words, these advisors who have departed now have three or more firms on their resumes,” the executive, who was granted anonymity to discuss the firm’s performance, said.
“This dynamic, as you would expect, reaffirms for us the commitment to organically growing our advisors and helping them achieve long-term career success at Merrill,” the executive said, adding the firm expects “low-single-digit growth in our advisor population annually over the next five years.”
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