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Few regulations and a number of ownership changes 
in the independent broker-dealer space could make 2016 a good year for recruiting. 

“It’s been an interesting environment, to say the least,” says William Morrissey, managing director in charge of recruiting at LPL Financial, about the regulatory environment, evolving interest-rate policies, market volatility and nonstop consolidation.

“All of those things are creating disruption in the marketplace,” Morrissey says.

And where there is disruption, there are recruiting opportunities. Lots of them. In May, American International Group completed the sale of its Advisor Group of broker-dealers to Lightyear Capital and a Canadian investment manager. The ownership change impacts about 5,200 advisors.

Also in May, John Hancock Financial Network completed its acquisition of Transamerica Financial Advisors and its 800 advisors. The same month, Cetera Financial Group emerged from bankruptcy with a new parent company (Aretec) and a plan to better integrate its 10 broker-dealer firms, which handle 9,000 advisors among them. 

Some reps affiliated with Cetera-owned Investors Capital and VSR have had to move to other Cetera firms or leave. So those two firms have been the most fruitful prospecting grounds within the Cetera camp, recruiters say.

Lastly, in July, MetLife finalized the sale of its broker-dealer unit to Massachusetts Mutual Life Insurance Company. The B-D business serves about 4,000 advisors.

As a result, “recruiting is picking up steam at many firms” that aren’t undergoing a change of ownership, says Jodie Papike, executive vice president of Cross-Search, a Jamul, Calif., recruiting firm. “Advisors feel if they have to go through a transition, they might as well know what all their options are.”

“We’ve had a lot of incoming calls—double the normal volume because of those [ongoing] deals,” says Eric Schwartz, founder and chief executive of Cambridge Investment Research. In some cases, people were given a few months to move from firms that were reorganizing, he says. “As a result, we’re having the best recruiting year in the history of our company.”

As of mid-July of this year, Cambridge had commitments from advisors representing $64 million in revenue, Schwartz says. That sum by itself would be a better-than-average recruiting year. He expects to end the year with $85 million to $90 million in added revenue.

And Schwartz expects the consolidation to continue. Currently, the top 10 B-Ds have about 60% of the business, but he predicts the top surviving firms will end up with an 80% to 90% share over the next 10 to 15 years.

“It’s just not easy for small B-Ds,” he says. “Some are well run and have a super niche, [but profit] margins are tough,” and the coming DOL rule will shrink profits further.

Over at AIG’s former Advisor Group, things aren’t nearly as problematic as some competitors looking to poach reps might depict. Spokesman Tony Vignieri says the overall retention rate year-to-date at the group’s four broker-dealers was 95% following the Lightyear announcement in January.

The ownership change closed without much disruption, says Jeff Auld, chief executive at SagePoint Financial, one of the Advisor Group firms. There was “no repapering of any accounts, and the technology we were using, and everything, stayed very much the same.”

When the Lightyear deal was announced, Auld says he and his staff met with the recruits they had in the pipeline and ended up keeping every one. His goal this year is to recruit $16.5 million in revenue. At the end of June, SagePoint had commitments of nearly $10 million, he says.

Morrissey at LPL says volatility and angst over the (then yet-to-be released) DOL rule slowed movement in the first quarter. “Despite that, we’ve had a very steady recent pipeline,” Morrissey says. “It looks like things are starting to loosen up.”

In the first quarter, LPL added a net 39 advisors, a turnaround from the net loss of 44 through all of 2015. The firm does not break out recruiting data or net new assets, but its advisor count has remained at around 14,000 since the end of 2014.

Nevertheless, Morrissey says 2015 was the third-best recruiting year in the firm’s history. Head count can be misleading because of the number of retiring LPL reps, he says. The firm has also said it culled its ranks, cutting lower-producing brokers last year.

Papike, who recruits for LPL and other independent firms, thinks LPL may be on the upswing. “Their pipeline looks really good, they have some really large deals [pending], and my guess is their numbers this year will be very good.”

Andrew Daniels, managing principal of business development at Commonwealth Financial Network, tells much the same story about a slow first half. The beginning of the year was slow, possibly because of what he calls “DOL ambivalence,” but the second half “is looking to be significantly over what we normally do,” he notes.

Daniels expects to add $45 million to $50 million in recruited revenue this year, about even with last year’s $50 million.

Raymond James Financial Services is on track for a record recruiting year, besting even 2009—when firms feasted on advisors fleeing from failing institutions, says Scott Curtis, Raymond James’s president.

This year, more recruits are coming to Raymond James from other independents, Curtis adds. Normally Raymond James does well with wirehouse recruits, but the shift to gathering more from other independents is “probably one of the biggest contributors to our big year. … [Independent prospects] are concerned about future capabilities of their firms, or they’ve outgrown their firm,” he says.

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