When advisors consider moving to a new broker-dealer, they must weigh the cultural fit and services of the firm they’ve got their eye on more than just the financial incentives that have prompted them to move.

That means considering the feel and financials of any broker-dealer trying to recruit them, says Jeff Nash, CEO and founder of BridgeMark Strategies, a coaching and consulting firm in Charlotte, N.C. Before founding BridgeMark, Nash was a senior in-house recruiter at LPL Financial.

“Firms need to look at the ‘feel’ of a broker-dealer they are considering joining, which includes whether the two firms are aligned on their future goals,” Nash says. “Then they should consider the ‘fit,’ which is the products and services the two offer. And finally, they need to weigh the financial incentives”—which can include things like forgivable loans and up-front payments. “Advisors get wooed by the financials in an offer. Then three years later they realize they are miserable when the proper ‘feel’ and ‘fit’ are not there, and they want to make another change.”

The aggressive recruiting environment, with aggressive incentive packages, currently gives the edge to financial advisors, especially those who want to move. And Nash says this situation will likely continue at least through the end of the year. But the offers have to be weighed against how well an advisory and its new broker-dealer will mesh.

David Fischer, co-founder of the Independent Financial Group, a midsize independent broker-dealer based in San Diego, says his firm “is not caught up in the war of writing checks” and has done very well in the current market. The firm now has 650 advisors affiliated with it, and is one of the youngest and fastest growing independent broker-dealers in the financial industry.

“We’ve seen advisory firms that have a lot of turnover issues, so we decided we want to help the advisors realize their true vision and eliminate some of those issues. In the last three to five years, 95% of our advisors have come from wirehouses or big firms. They are looking for an independent culture in the fee-based arena, not just money,” Fischer says.

His company attracts advisories in need of a succession plan, as well as those that want to grow, he says. The firm had $257 million in revenue last year and is on track to have $300 million by the end of this year.

Such midsize broker-dealers are facing deep-pocketed giants, of course, including LPL Financial, which has nearly 21,000 financial advisors and approximately 1,100 institution-based investment programs. The firm also affiliates with approximately 500 independent RIA firms nationwide.

LPL has beefed up its wealth management capabilities and service capabilities in the last few years to better service its advisory firms, says Scott Posner, executive vice president of business development. The pandemic slowed the movement of advisors from one channel to another and from one broker-dealer to another for a time. Before the pandemic, advisor movement industry-wide averaged 6.8% a year, but that has slowed to 5.8%, Posner says, both because of the impact of Covid and the current market unrest and rising interest rates. Advisor movement to LPL has actually increased and Posner adds that a continued recovery is expected.

LPL, like many other broker-dealers, no longer likes to think of itself as a broker-dealer but instead as a wealth management firm. That shift in terminology has happened throughout the industry as broker-dealers seek to reimagine their businesses beyond transaction services.

“We have been creating different ways that advisors can join us, so we think of ourselves as a wealth management firm now,” Posner says. “Firms could join us as a 1099 firm [an independent contractor] or as a 1099 firm with some support. Then about a year and a half ago we added the capability of firms to join us as a W-2 advisor [in other words, as an employee], but in a way that they are still independent.”

LPL Financial supports all advisor business models, from fee-only firms to those that are fee and commission combined. The firm has long targeted wirehouse advisors who want to be independent contractors. Its basic value proposition is that it will handle chores they don’t want to.

“We continue to create new affiliation models to suit all types of firms from high-growth to those that are more mature,” Posner adds. “It’s hard to be a small or midsize firm in the wealth management space. You need to have the resources to support advisors.”

Many wirehouse brokers enjoy the security and benefits of a big company while others are attracted to the idea of independence. Doug Ketterer, CEO and founding partner of Atria Wealth Solutions, a wealth management company headquartered in New York City, agreed that the money is often not the first priority for advisors who are moving. “Going independent is not for everyone, but it is a solution for financial advisors looking to control their own destinies,” Ketterer says. “Independence means they can interact with their clients in their own ways.”

The barriers to going independent can be big, he says, but the job of an independent broker-dealer is to make the transition easier. In many ways the pandemic was a catalyst and an accelerant for the transition conversation. “The big firms sent everyone home when it started, and advisors realized they can do this on their own,” Ketterer says. “Everything had been done for the advisor in the past, but they did not truly own their client relationships.”

There are a lot of moving parts to control once an advisor decides to declare his or her independence. That’s where broker-dealers can help.

At Atria, two programs have been developed to help ease the transition pains. “Team Assist” handles the logistics of creating a new firm, and “Tech in a Box” provides the technology that today’s advisors require. “Covid reinforced the power that technology can provide in running an office,” Ketterer says. “It is an enabler, not a replacement for the advisor. The advisor is the one delivering the advice—he or she is the constant in the equation.

“There are so many different ways to approach independence that the solution becomes more about why the advisor is looking to leave one firm for another, and what kind of culture he or she wants,” he adds.

There are numerous ways a broker-dealer can stand out from the stiff competition, and one of them is to promote diversity at all levels. Alex David, CEO of Stifel Independent Advisors, is one such example. He’s a Black man in a leadership position in an industry dominated by white males that is constantly struggling to increase diversity.

“This is a crowded field, and some players have outsized capital. But the advisors we are attracting are the ones who want access to the decision makers,” David says. “We decided a couple of years ago that we wanted to be super focused on how to be outstanding, including having advisors and leaders who look like the people we are serving.” Almost half of the advisors at Stifel are female or people of color, he adds.

“Some people think advisors want complete independence, but they really want control backed by resources. That puts us in a unique position to offer just that,” David says.

As the landscape changes and mergers and acquisitions continue to soar, new possibilities for relationships with broker-dealers also are emerging, according to Larry Roth, managing partner of RLR Strategic Partners, a private investment and mergers and acquisition advisory firm affiliated with Berkshire Global Advisors, the international investment bank focused on financial services. Roth is also the former CEO of both Cetera Financial Group and Advisor Group.

“The landscape is as competitive as it has ever been, maybe even more so,” Roth says. “Broker-dealers are working hard to recruit advisors and to make relationships as permanent as possible. There is lots of capital for publicly traded firms and in private equity that is available.”

He points to new arrangements that broker-dealers are making to provide capital to advisors, especially those who need succession plans. One he helped develop was SuccessionFlex, a program run by AmeriFlex (which is itself an RIA and OSJ affiliate of SagePoint Financial, a subsidiary of Roth’s old domain Advisor Group). SuccessionFlex gives advisors a pathway toward a succession and continuity agreement that includes an option to sell 30% to 40% of their current revenue streams to AmeriFlex. AmeriFlex Group announced in early September that it is paying out $8 million to nine advisors who have joined SuccessionFlex.

Roth says similar programs are also underway at firms like Kestra, which created a separate business unit, Bluespring Wealth Partners, designed to purchase equity stakes in RIAs and wealth management firms to help with institutional-level support and succession planning. Kestra recently scored a major coup when it hired longtime Fidelity executive David Canter, who had led the financial giant’s RIA custody business, as president of Bluespring Wealth Partners.

Industry observers privately noted that Canter would not have made the move if Kestra had not promised to give him lots of capital to grow Bluespring. “A lot of broker-dealers are buying firms to tuck in and providing the capital for those firms to buy and tuck in others,” Roth says.

Becca Hajjar, managing principal and chief business development officer at Commonwealth Financial Network, says her firm has added 90 advisors with $7.5 billion in assets so far this year. The package for each in-coming firm is different, but is designed to encourage growth.

In June, Commonwealth announced Strategic Financial Services based in Cedar Rapids, Iowa, with $1.2 billion in assets, had joined the platform.

Jamie Price, president and CEO of Advisor Group, one of the largest networks of independent advisors in the U.S., called the current environment “a fascinating time to be in wealth management.” Advisor Group has 2,400 employees, who serve the needs of the firm’s approximately 11,300 financial professionals.

He, too, says broker-dealers are morphing into wealth management firms. “This means there will be more of a team approach and more holistic management.”

Consolidation in the industry will not stop, but that’s been advantageous to companies like his. In part the M&A is being forced on the industry because “it is almost impossible to be small these days,” Price says. “A few years ago we were seeing consolidation of the smaller firms; now we are seeing it for midsize firms. They need the advantages of scale.

The next iteration of the industry will require advisors to think about clients as whole families so they can deepen relationships. “That will make them more valuable to the broker-dealer,” Price says.

LaSalle St. Securities is a broker-dealer based in the Chicago area with $12 billion in assets and 325 independent advisors. Mark Contey, the senior vice president of business development, says the firm is celebrating its second year of a 100% retention rate for advisors.

“We are transparent and do not nickel and dime our advisors to death with fees,” Contey says. The firm added $750 million in new assets in 2021 and is on track to add $1 billion in assets this year.

“The challenge of running a day-to-day office for firms with less than $150 million in AUM may be getting in the way of growing the business,” which makes them want to have a broker-dealer to help handle those tasks, Contey says. “Coming out of Covid gave advisors an opportunity to reassess their situations.”