The demise of Wall Street as we knew it has led to a new conventional wisdom that goes something like this: The wirehouse broker-dealers are dead, long live the independents! As part of this upheaval, waves of disaffected advisors affiliated with wirehouses are expected to bolt their companies for mid-sized or smaller firms, accelerating a long-term trend.

While reports on the death of the wirehouse brokerage firms are premature, news from the trenches indicates that advisors are switching firms--or at least inquiring about switching--in ever-larger numbers. "There's certainly been an unprecedented number of bodies in motion right now," says John Rooney, managing principal of Commonwealth Financial Network's West Coast operations. "I've been in the business for 25 years and I've never seen this much activity." 

In March, 2,624 reps changed broker-dealer firms, up 34% from February, according to Discovery Database. More than 40% came from the wirehouses. Of these, 58% went to other wirehouse broker-dealers, 12% chose a regional firm, 10% went independent, and the rest scattered among other channels.

While many wirehouse networks find themselves playing musical chairs, or musical brokers, the statistics may understate the impact of their exodus from Wall Street. Some experienced brokers with huge books of business are giving up their securities licenses and becoming independent registered investment advisors. At the same time, more than a few rookies finding it difficult to survive are leaving the business entirely.

It's a sign of the times that some firms have been established for the sole purpose of lifting some giant groups, each managing billions in assets, out of the wirehouses. Among them is HighTower Advisors, a Chicago-based registered investment advisor and independent broker-dealer founded last year backed by a group of financial heavyweights that includes ex-Charles Schwab CEO David Pottruck. One rumored investor, former Morgan Stanley CEO Philip Purcell, will neither "confirm nor admit" that he is an investor, as one HighTower executive quips. Read that as you want.

HighTower's big broker recruiting efforts have landed a number of elite wirehouse reps from UBS, Merrill Lynch, Morgan Stanley and Goldman Sachs. Among them is Richard Saperstein, who recently brought over $10 billion in client assets from JPMorgan Securities. "In less than seven months we've gathered 15 managing directors from major firms," says HighTower CEO Elliot Weissbluth. "We've proven we can successfully attract top advisors, and we think we'll see more."

As an incentive, HighTower has issued 25% of the company's equity into a partnership that's divvied up among financial advisors who join the firm. But the firm also sets each group up in an office, ensuring they have to pay little attention to transition details beyond moving clients to HighTower. "Not only do advisors become meaningful equity partners," Weissbluth says, "but they're treated like and they operate like real owners."

In the case of Commonwealth, the company says that home-office visits by prospective advisors jumped 50% during this year's first quarter, and that new advisor revenue leaped 70% during the quarter from the same period the year before. The firm expects that the advisors who have committed to join it will produce a 120% increase in new advisor revenue in the second quarter.

New Commonwealth advisors have come from traditional wirehouses, but also from insurance-company-owned firms and larger independents. "It's not that we're doing anything different," Rooney says. "We're the same company we've always been. It helps that we're not having the issues that other big companies are having."

Because of the bad market and because some high-profile firms have been in the news for the wrong reasons, advisors-and their clients-have begun to question the benefit of maintaining relationships with their current broker-dealers, Rooney explains. "For many financial advisors, their pain threshold has been exceeded and there's been a quantum shift where the gulf between us and them [their former firm] is so large that they're willing to go through the two to three months of transition to a place they think will be better for them for years to come," Rooney says.

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