Recruiting Loans Swell at LPL and Ameriprise, Compress at Wirehouses
Ameriprise Financial and LPL Financial grew their “forgivable” loan balances from financial advisors by 10% and 46% respectively last year, testifying to their sharp appetite for recruiting at a time when wirehouse competitors have curbed their appetite for expensive hires.
LPL, the largest independent broker-dealer as measured by its 16,109 brokers, had a balance of $233.3 million owed by advisors as of the end of 2018. That is up a whopping 46% from $159.9 million 12 months earlier, according to its 10-K annual report filing with the Securities and Exchange Commission.
The loans are forgiven over three to eight years if brokers remain affiliated with LPL.
At Ameriprise, forgivable loans that amortize over five to nine years climbed to $558 million as of year-end 2018, a 9.6% increase from 12 months earlier, according to the Minneapolis-based company’s 10-K annual report filing.
Ameriprise’s filing did not distinguish between loans to advisors in its employee channel and those in its larger independent channel. The company had 7,755 independent advisers at the end of 2018 compared with just under 2,200 who are employees.
The jump in recruiting loans at regional and independent firms contrast with the trends at wirehouses.
UBS AG’s advisory loan balances declined by 12% to $2.30 billion as of the end of 2018 across its global wealth division, according to its most recent earnings report. The loans are concentrated in the U.S., where the Swiss bank has approximately 6,300 brokers.
Tom Naratil, the head of UBS’s Americas region, said almost three years ago that he was cutting the firm’s recruiting budget by 40% (although UBS recently made an exception for a Goldman Sachs team managing some $6.6 billion of client assets). At the end of 2016, UBS had more than $3 billion of loans owed by brokers on its balance sheet.
Morgan Stanley has similarly curbed its recruiting appetite, looking to lighten its balance sheet concurrent with the runoff of retention payments to former Smith Barney brokers.
Forgivable loan balances at the New York company declined by 18.4% to $3.415 billion as of the end of 2018 from $4.185 billion a year earlier, Morgan Stanley said in its 10-K filing.
Both Morgan Stanley and UBS attempted to offset their new-hire drought by dropping out of the Protocol for Broker Recruiting at the end of 2017 in an effort to curb departures of veteran advisors.
In contrast, LPL has bolstered its roster of internal recruiters—hiring former UBS executive Rich Steinmeier last summer—and is dangling hiring packages that can reach more than 50 basis points of transferred assets before fee-based advisors who agree to use its corporate registered investment adviser.
“There are a handful of independent broker-dealers that have gotten more aggressive than at any other time,” said Jodie Papike, a recruiter at Cross Search who specializes in the independent space.
LPL last year hired advisors who are expected to attract $27.3 billion of assets to the firm, the company said in its fourth-quarter earnings report.
Ameriprise has also been enhancing hiring packages for recruits to its employee channel, offering as much as 320% of commissions and fees generated in the previous 12 months to those who meet certain production and asset-transfer targets.