(Dow Jones) Independent financial advisors are getting into the recruitment game.
Independent financial advisory firms, which have won clients away from Wall Street brokerages over the past year, are now drawing away brokers, too.
As independent firms become more established, many are looking to accelerate growth by recruiting financial advisors who already have books of business. These firms want financial advisors interested in the independent model but don't necessarily want the hassles and responsibilities that come with running their own businesses.
Traditionally, independent firms have grown organically, one client referral at a time. And entrepreneurial brokers have left big Wall Street firms, alone or in teams, to start their own advisory businesses.
"The meltdown in the market diminished the global brands of wirehouses and opened up the window of opportunity for large independent firms to get experienced talent at profitable levels," said Matt Cooper, co-founder of Beacon Pointe Advisors in Newport Beach, Calif.
After having increased the 21-person advisory firm's assets to about $4 billion from $1.6 billion in 2002, Cooper said he is now on a hunt for talent. The company is working with nine recruiters as well as its custodian, TD Ameritrade (AMTD), to attract new advisors.
While Beacon Pointe said it cannot compete with big upfront bonuses from Wall Street firms, known as wirehouses, it can offer a payout starting from 50% of production, opportunities to acquire an equity stake in the firm and a bonus at the end of 12 months based on revenue production of an advisor's first year.
"Instead of just hoping to capitalize on wirehouse brokers breaking away, we wanted to create a competitive offer and formalize the process of bringing brokers on board," Cooper said.
Companies that safeguard investor assets for independent advisors said the movement of brokers to existing independent advisory firms is picking up steam.
From 2008 through 2009, TD Ameritrade Institutional said it saw the number of breakaway brokers rise by a third, with 75% of those newly independent advisors joining an existing advisory firm, rather than start their own firms. At Schwab Advisor Services, more than 40% of the 172 financial-advisor teams that went independent with the custodian in 2009 joined existing firms . More than half of the 191 advisors that went independent with Fidelity Institutional Wealth Services joined existing firms.