Research: What's your view of today's recruiting market for advisors?
Diamond: It will be a very robust recruiting market.
It can't be as robust as 2009, because 2009 was so incredibly unprecedented. But in 2010 we're seeing activity on the part of a lot of thoughtful advisors, advisors not just jumping in for greatest check, but advisors who are really trying to figure out what's best for themselves and for their clients long term.
What factors will most important in this year's recruiting market?
The reason that the 2010 recruiting market will be so robust is that we have many things happening at once. It's really a dizzying array of choices.
The wirehouses are back to their recruiting wars, and they are paying 300 to 330 percent of trailing 12 months' sales, though it's not all upfront, but over time. And these are the biggest deals we've ever seen.
We've got the independents in on the act. The broker-dealer and custodial organizations are really providing advisors with opportunities for independence with advisors who are looking for more independence of any kind.
If someone wants to open an office, the custodians have gotten real great at giving them the tools and resources the advisors who want to make this happen. Some advisors may want to plug into a group that's already independent, and others want to become part of a consolidator-focused group, like Focus Financial or United Capital Partners.
The point is that there is a lot of choice, and there are a lot of frustrated advisors who are always looking for a better way of doing things. And this is why I expect 2010 to be a robust recruiting year. And I think the recruiting environment in the first seven days tells a lot, and it's been a very busy first seven days.
What are recruiting packages looking like in 2010?
The wirehouses —Morgan Stanley and Bank of America/Merrill Lynch, in particular —are paying about 330 percent in total over five years, 120-140 percent in cash upfront and up to five bonuses, nearly all cash. Morgan Stanley is all cash; Merrill includes some stock.
These are really deals that are structured for the growth-oriented advisor. Though 140 percent in cash upfront is a lot, it's not necessarily enough to make an advisor move. Unless the advisor is in a growth mode and has a really good shot of hitting the backend bogies, which means you have to be at certain levels of assets and production at the end of years one, two, three, four and five, these are not deals that make sense.
UBS is now led by Bob McCann, who has said that he didn't want UBS to be offering the biggest deal on the street, which it isn't. It is not as competitive as the Morgan Stanley deal.
It's offering top first and second-level quintile producers 130 percent cash upfront. There are also four asset-based bonuses offered for the first four quarter of the first year.
The first one is 55 basis points of whatever assets you have at the end of the first quarter; the second is 50 basis points of what assets you have at the end of the second quarter; 45 basis points for assets at the end of the third quarter; and 40 basis points for assets at the end of the fourth quarter.
