The Market For Advisor Transitions Is ON FIRE – Understand The Reasons Why

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On the surface, it seemingly defied logic given 2020 was a year defined and transformed by COVID-19. Yet, as December drew to a close and the numbers came in, 2020 proved to be one of the hottest advisor transition and recruiting markets ever experienced in the financial services industry. A quick analysis of the numbers tells the tale. According to AdvisorHub’s Recruiting Wire Scoreboard, the top three leaders in 2020 NET recruiting acquisitions; which included LPL Financial, Rockefeller Capital, Management, and First Republic, tallied a total of $64,760 MLN AUM as a result of their recruiting efforts. Looking back at 2019, the data recorded shows the top three totaled $62,821 MLN AUM. And, two years ago in 2018, the top three netted $35,749 MLN AUM as a result of recruiting. These numbers convey a decided message that we are in the midst of an upward trend in advisor recruiting and transitions. Which leaves us with the question, why?

First and foremost, the primary factor impacting the increase in advisor transitions is the advisors themselves and their mindset. The COVID-19 crisis of 2020 proved to be a great illuminator, not a detractor, of the pluses and minuses of each advisor’s practice. Work from home measures made every advisor a de facto independent advisor and brought to light whether an advisor had the skill sets independence required, among them the discipline and organizational wherewithal to run your practice as an entrepreneur. As more and more advisors realized they did have what it takes to go independent, they also realized they were leaving money on the table by staying in a W-2 model. Advisors had already experienced what independence was like, making the leap of a transition less of an unknown and instead a clear path to autonomy and greater financial reward.

Secondly, last year proved the importance of firm partners offering their advisors a solid framework of support and the impact of that support as an imperative on securing and retaining clients. Consider the playing field of 2020. One constant in every individual’s life last year was their money. The nationwide shutdowns impacted every person and their family where it mattered most – in their bank account – making financial planning and the knowledge provided by a skilled financial advisor not a luxury but a necessity. Add to that the change in communication. Face-to-face client meetings were off the table due to the virus. Video conferencing technology, robust client platforms conveying understable real-time data, and consistent electronic communications made all the difference as to whether an advisor secured or retained a client. Those firms offering the best and most cutting-edge in technology and advisor support, while also demonstrating a clear plan for even more dynamic advisor support systems in the future, became an example of the old ‘grass is greener’ adage and proved an attractive alternative to advisors looking to improve their capacity and efficiency.

Finally, and perhaps most significantly, the recruiting market upswing is not just a reflection of advisors understanding the market shifts of 2020 and how to adapt in order to be successful. It is also a tale of the firms themselves recognizing opportunity and pivoting to reap the benefits. Regardless of the type of firm model; whether W-2, independent, or multichannel, those firms focused on success have upped their recruiting game offering advisers lucrative transition deals and attractive practice options tailored to their personal business styles and needs. What’s more, firms are investing in technology and in their advisors, putting their money where their mouth is and providing the tools, feedback, and support needed to achieve in this new era financial services. Even more important, the best firm’s are finally conveying not just in words but in action a belief that has been much needed in financial services yet took a long time to arrive – that their advisors are the most important asset a firm has or will ever have.

A new year is always a blank slate and a time of reflection and evaluation. This holds true for individuals and businesses alike. As we enter the new year, it is apparent that the financial services industry has taken stock of the lessons of last year and reevaluated how business is done on every level from internal operations to client-facing communications and marketing. With that knowledge well in hand, firms are now focused on acquiring and partnering with advisors and teams that have the skill set, intellect, and drive to achieve in the financial services industry of today, leaving now doubt that the recruiting market will remain on fire and realize even more growth in the months to come. Which leaves one to speculate, who will the winners be in the recruiting wars of 2021? Let the games begin.

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Comments (1)
  • The author here makes some valid points. I would add that the firms which left the Broker Protocol with the intent of clinging on to their advisors have witnessed that strategy fail miserably.

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