Cambridge is offering, on average, 10%, he says, though the offers range widely around that average. Meanwhile, he's seen other broker-dealers make offers of 30% or higher.
Most B-Ds look for advisor buisnesses of a particular size that will fit with their existing models. Some take firms that operate only on fees, while others admit firms charging both fees and commissions. It is important to recognize that the broker-dealer can offer a lot more than money. It can also make services available to help reps with their business.
"It is a much more complicated process now. It used to be much simpler," Schwartz says, adding that his company has lured advisors away from competitors promising more money by advertising Cambridge's reputation and services. The company not only offers back-office support and technology, but can also help advisors come up with their succession plans and help structure and finance their acquisitions.
"We'll even answer the phones for them and host their Web site, if they want," he adds.
For such services, advisories pay some of their revenues to the broker-dealer. For Securities America Inc., the fee ranges from 5% to 8% of revenues. For that, the advisor gets business processing, compliance support, a transition team, technology, practice management programs, a comprehensive retirement income distribution platform and other services.
"We have a branch office development team today of 12 and a transition team of five," says Gregg Johnson, senior vice president of branch office development and acquisition for Securities America Inc., which now has $12.5 billion in assets under management and more than 1,600 advisors. "The transition team works with the advisor for 60 days prior to their joining us and 180 days after, to make the transition as smooth as possible." The firm's goal is recruiting growth of 10% to 15% this year.
Once they join, advisors get approval for changes they want to make or for their advertising. They can also take seminars to make sure they comply with SEC regulations. Most advisors joining Securities America use the corporation as their RIA, while a minority retain their own RIA status.
"The movement of RIAs is still there," says Johnson. "More advisors are going to a fee business, and many are realizing they can do their advisory business without being their own RIA. It is more efficient to have us do the compliance and support work so they can spend their time with clients."
The movement is part of what Discovery Data in Eatontown, N.J., calls a seismic shift in the financial services industry. From 2009 through 2011, the independent broker-dealer channel realized a net gain of 4,288 reps, while the wirehouse broker-dealer channel lost 3,621. "That is an enormous three-year shift," said Discovery Data in its BD Rep Movement Study of March 2012.
Last year alone, not even the most active, the independent channel gained 1,173 representatives and the wirehouses and regional broker-dealers lost 1,050.