Page 34 - Investment Advisor June 2021

Cover Story

All of these [new]

What’s a more recent issue or models … exist advisors vote with their feet and
trend affecting recruiting and leave to go for a more independent
advisor movement? because these firms model over the last decade.
LOUIS Deals are at a high point, Their thinking is that it would
especially for top teams. There’s were watching cannibalize their private client
never been more competition for opportunities pass groups and their employee-based
the industry’s elite talent. The advisors. The margins are razor
headline numbers that we’ve seen them by. Maybe thin in the independent space, and
include the 300%-plus deals that they’ve lost advisors they don’t really have a desire to
have been in place for the last five do this.
or six years. from their own firm They’re going to stick to their
But a big difference today is that knitting. They’ll continue to do
firms are now putting more of that who were looking to what they do and do it well. If
deal [money] upfront than ever. evolve their practice they lose people along the way, in
Many are reimbursing an advi- the scheme of things, say 10 or so
sor for all or a portion of their and couldn’t meet the of their top advisors in a year, and
unvested deferred compensation, need, or they lost deals they’ve got 15,000 advisors — by
which is really important to them. their math, it’s a rounding error.
They’re making the goals in the because they didn’t
deals a bit easier to hit. have these capabilities What’s your view of firms
Overall, it’s a really good time that give advisors broker-
to be a seller or to be an advisor, or this kind of level of dealer and RIA options,
because there’s more competition such as Raymond James,
for their business than ever before. freedom as advisors Commonwealth Financial and
Firms that are serious about were looking for. LPL Financial?
recruiting have really had to step LOUIS In the last year, these
up, both in terms of the deals on —Louis Diamond firms have introduced multi-
a percentage basis and with their ple new affiliation models, and
structure in the value proposition. that is 100% motivated by these
changing dynamics — advisors
MINDY As advisors look past the wirehouses or the tra- are looking for different ways to affiliate with their organi-
ditional broker-dealer options and look at options like zation than ever before.
Rockefeller, Sanctuary Wealth Partners or other models of In the case of LPL and its bid to capture much more top-
quasi-independence, what’s on the table a lot of the time is end wirehouse teams, they started Strategic Wealth Services, a
equity. We’ve got an advisor [client] now that is with a wire- more supported, premium offering. They also started an inde-
house and is looking at a quasi-independent boutique firm. pendent employee unit called Linsco. They’re doubling down
Fifty percent of the deal is being paid in cash, but the other on their services as an RIA custodian.
50% is equity. Now that’s what’s really changed. Commonwealth started a supported version of indepen-
dence geared to wirehouse advisors, as well. They also rolled
What does all this change mean for the big firms? out their RIA-only, or IAR-only model.
MINDY Are these big firms nimble enough to meet the advi- All of these different models — and there’s plenty of other
sors where they are? They are losing advisors because their ones that other firms have created — exist because these firms
leaders are not paying close enough attention to what’s driving were watching opportunities pass them by. Maybe they’ve
movement. Some of the things advisors want would mean easy lost advisors from their own firm who were looking to evolve
and inexpensive fixes. Instead, the leaders allow compliance their practices and couldn’t meet the need, or they lost deals
to run the firm, and often that means a much less entrepre- because they didn’t have these capabilities or this kind of level
neurial culture than advisors want. of freedom as advisors were looking for.
It’s also a question of desire. If Merrill, Morgan Stanley and
UBS wanted to launch an independent arm, they’ve had plenty MINDY The story behind this evolved industry landscape is
of opportunity to do so. They’ve watched plenty of their top that most of the models and most of these newer firms were

32 INVESTMENT ADVISOR JUNE 2021 | ThinkAdvisor.com