And in the fourth quarter, LPL rolled out an in-branch recruiting program aimed at offices that want to bring on five or more new advisors during the upcoming 12 months. The program provides access to a database with roughly 500,000 licensed security producers, along with marketing materials and assistance from the company's 30 national recruiters.

Beyond The Big Two
According to industry sources, the average payout for independent broker-dealers is 85% to 90% versus 30% to 50% for the wirehouses. Larry Papike, president and owner of Cross-Search, a broker placement firm in Jamul, Calif., says some smaller independent broker-dealers--particularly those with $30 million to $50 million in revenue who are contending with declining assets and gross dealer concession--might not have the resources to compete with the big boys in the recruiting game.

"The bigger firms can afford to offer a 90% payout rate because they have money coming in from a lot of different sources," he says.

Nonetheless, Papike says some well-capitalized smaller firms, such as Geneos Wealth Management, are positioned to do well. In April 2008, Geneos bagged a group of 16 seasoned advisors with gross revenue of $6 million from Royal Alliance. "They saw the writing on the wall regarding large conglomerate broker-dealers," says Ryan Diachok, vice president of marketing and business development at Geneos, a $70 million firm in Centennial, Colo. "They didn't like the direction of their company, the corporate culture and lack of flexibility in dealing with headquarters."

All told, Geneos added 44 advisors last year, and another 20 during this year's first quarter. Prospective advisors need at least $150,000 in annual gross dealer concession (the firm's average is $315,000) for individual reps and $350,000 for branch offices, and the firm seeks advisors with clean records and practices that jibe with Geneos' existing business, currently a mix of about 55% fees and 45% commission. While the company does some proactive recruiting, it relies mainly on referrals from existing advisors and various industry contacts.

Geneos was founded in 2002 by Ryan's uncle, Russ Diachok, and Russ' father, George. They sold their prior broker-dealer, Multi-Financial Securities, to ING, and after a nice payday they stuck around for several years and oversaw the unit's growth from 350 to 850 reps. The Diachoks left ING and started Geneos with the goal of remaining small and giving advisors more independence and a stake in the company.

The company is slightly more than halfway to its goal of 500 reps, but they don't have a set time frame for achieving that. "That's by design," says Russ Diachok, Geneos' president and CEO. "We want to keep it that way so we know who the advisors are and vice versa. We learned from past experience that you start to lose that after you exceed 500."

Geneos offers stock ownership to new advisors, as well as options to existing reps based on production. It touts its proprietary, Web-based open-technology platform called Nexus, which it provides to other broker-dealers through its Gentech subsidiary.

And it believes one of its biggest calling cards is its independent culture. "We're on the extreme independence side of the spectrum," says Ryan Diachok. "We don't have any proprietary products, and advisors have the flexibility to run their business as they see fit."

VSR Financial Services is another small broker-dealer that believes its size and independent culture appeals to entrepreneurial advisors wanting to call their own shots. Based in Overland Park, Kan., VSR did $92 million in revenue last year, and it's working on a three-year plan to grow revenue to about $140 million by 2011-both organically and through recruiting. VSR's goal is to expand its 260-strong rep force by about 10% annually, or 25 to 27 reps per year. "We don't want to do it too quickly because it will impact our services," says Chris Radford, VSR's president.