The number of broker-dealers employing more than 10,000 financial advisors jumped from five to eight during 2007, according to Cerulli Associates' annual survey of the top 25 broker-dealers in the U.S. The three latest firms to hit that mark were LPL Financial, AIG and Edward Jones, and their growth is notable considering Cerulli's findings that the number of advisors in the marketplace is shrinking. "The industry isn't doing a good job in attracting new advisors," says Cerulli analyst Bing Waldert.

   Broker-dealer growth generally occurs one of three ways: recruiting new advisors to the industry; recruiting experienced advisors from other broker-dealers; or acquiring another broker-dealer and its advisors. "What struck me is all three [broker-dealers] got there [10,000 advisors] in fairly different ways," Waldert says.

   Of the three, LPL expanded the fastest last year with a roughly 70% growth rate, to 11,000 advisors. The company acquired more than 3,000 advisors with its purchases of three independent broker-dealers from Pacific Life, as well as another 1,500 advisors from two bank third-party marketers-Uvest and IFMG.

  AIG increased its advisory ranks from less than 9,000 advisors to more than 10,000 in part by acquiring three small broker-dealers. It also recruited roughly 250 experienced advisors from other firms in 2007 through one of its broker-dealer units, FSC Securities, along with smaller numbers of experienced advisors recruited by each of its other four affiliated broker-dealers.  

   Edward Jones experienced the smallest growth, adding about 800 news advisors for a total of 10,500. Waldert says Edward Jones has one of the more unique business models in the industry with its focus on recruiting new advisors to the profession and establishing them in small, single-advisor offices. "Edward Jones is one of the few firms successfully hiring and training new advisors, with the exception of a handful of insurance broker-dealers," he says.

  Waldert says all three broker-dealer growth options have challenges. In many recent acquisitions, broker-dealers have struggled to retain the advisors of the acquired firm. In addition, the market for recruiting existing advisors is more competitive than ever, forcing many firms to stretch their finances to hire experienced advisors.