The Financial Services Institute (FSI) hosted its most widely attended OneVoice conference ever this week in San Diego. A common theme in many sessions was the future of the broker-dealer industry and how it was going to impact the B-D executives in attendance.
A Few Recruiters’ Perspectives
A panel of recruiters shared their thoughts on the industry, from their unique perspective dealing in broker-dealer negotiations with advisors.
Jodie Papike, an executive vice president at Cross-Search, says that service is important to advisors and one of the things that gets them to move to a broker-dealer. "A lot of advisors get frustrated with the service," she said.
Ryan Shanks, the founder and CEO of Finetooth Consulting, said the advisors ask themselves, "Am I really tapping in to all the things I really wanted?" If not, they can be lured away with compensation. If this happens, he said, “Bigger firms win, as they can get creative with transition money. It could be cost sharing. It could be getting involved in the recruiting.”
Jon Henschen, the president of Henschen & Associates, said compensation packages are encouraging advisors to make moves. When asked, "What is being offered?" he said, “Everything and anything.” He explained that it used to be that great service was all that broker-dealers needed to provide, but that is not the case anymore.
He gave examples of broker-dealers offering funding so an advisor can buy a practice. These companies are also offering equity and setting up practice management departments to help the advisors’ businesses. “It’s more about partnerships -- it’s not just about service. It is not enough to just process business and supervise it,” said Henschen.
When it comes to retaining business, Shanks said, “You can’t sit back and assume advisors want to stay with you, even though they have been with you for 15 years.” He spoke to the attendees about the hybrid RIA model and asked, “How are you going to stay ahead of this? If they won’t address this, we’re seeing B-Ds cut themselves out of the equations (even if they have great relationships with their advisors.)” He followed up with the question, “If advisors want to buy a practice, how are you going to support them?”
Papike explained that the broker-dealers have a problem with compliance. “We are in a different world with regulators.” She said advisors do not understand how much broker-dealers have to deal with compliance issues; they think so much of what is coming down on them is from the B-Ds, not the regulators. She also explained that the advisors need to understand that broker-dealers need to make money too.
Joe Russo, the panel moderator and the chairman and CEO of Advantage Financial Group Inc., said that when advisors negotiate payouts and fees, they must consider what the B-Ds are going through as they lobby for higher payouts. He likened it to what would happen if an advisor’s clients always asked for lower fees.
Papike said, “Advisors are more greedy than ever. It is not good for the industry. It is very difficult for the small and midsized B-Ds to deal with. Advisors expect more than ever before. They want more up-front money.”