Wirehouses are losing representatives at the same time that the ranks of independent broker-dealers are growing, according to a new study of a three-year trend of representatives' movements by Discovery Data.

"This is a trend that will have to be addressed or momentum has the potential of wreaking havoc on certain firms in the years to come," the study says.

Some 70,000 reps moved from one firm to another over the last three years with the majority moving among wirehouses and independent broker-dealers, the study says. However, institutional broker-dealers, banks and insurance companies also saw movement of reps.

Within this movement, the independent broker-dealer channel gained 4,288 representatives, while the wirehouse broker-dealer channel lost 3,621. That is a three-year shift of nearly 8,000 broker-dealer representatives that Discovery Data calls enormous.

The lines between wirehouses and other financial institutions are blurring and not all representatives are financial advisors, the report notes. But the wirehouses should not try to rationalize away the shift, says Discovery Data.

The shift in reps from one job to another was the least in 2009, when jobs were scarcest and some broker-dealers in both channels were laying people off. That year 17,000 people moved. The following year saw a huge jump to 32,000 representatives who moved -- a 90% increase -- followed by a more modest movement of 20,000 last year, the study says. That was out of a total of approximately 600,000 representatives as of 2011.

"The three-year period of 2009 to 2011 began amid the severe financial crisis and deep economic recession, which is not an environment for significant movement of reps between BDs," says Discovery Data.

But putting the three years together, wirehouses saw the biggest drop, with 14,337 representatives leaving and only 10,716 entering. The next closest channel losing representatives was banks, which lost a total of 2,328 during the three years.

The independent channel had 18,539 representatives who left but 22,827 who entered the field. The next closest in gains were institutional broker-dealers, which gained a total of 3,265 during the three years. Other examples of channels that saw much smaller gains or losses were discount broker-dealers, insurance companies and fund distributors.

LPL Financial was the standout for growth when compared with other broker-dealer channels and within the independent broker-dealer channel itself. LPL grew by a total 1,532 representatives, more than any other three broker-dealers combined.

"This is clear recognition of the strength of LPL's recruiting initiatives, the lure of independence, the power of the platform offered to advisors and the current satisfaction level of advisors working with LPL," Discovery Data says

-Karen DeMasters