Displaying items by tag: recruiting

According to recent SEC filings from LPL Financial and Cambridge Investment Research, it’s clear that M&A activity remains robust. Lately, it’s the independent broker-dealers that have been the most aggressive in terms of dealmaking. 

For instance, LPL Financial revealed that it made 19 acquisitions in 2023 using its ‘liquidity and succession’ program for a total of $190 million although this could rise as high as $297 million depending if certain criteria is met. Currently, LPL is a leading broker-dealer with over 21,000 advisors. 

Previously, broker-dealers offered succession plans for retiring financial advisors. A new development is that these broker-dealers are buying up their own advisors’ books. The most notable recent example is LPL buying one of its own branches, Financial Resources Group Investment Services which managed $40 billion in assets. 

The catalyst for this trend is the entry of private equity buyers into the marketplace which is increasing pressure on independent broker-dealers to retain the books of their existing advisors. According to Carolyn Armitage, an industry consultant, “Private equity buyers are willing to pay more for those assets. A firm like LPL also has a big advantage since they self-clear and that’s a more diversified way to earn money on those assets.”

Finsum: The M&A market for financial advisors’ practices remains heated. Private equity buyers are a new force and willing to pay large multiples. It’s forcing independent broker-dealers like LPL to be aggressive in order to ensure that existing advisors’ assets don’t migrate to a different platform. 

In 2023, despite upheaval in the banking sector particular with the key industry figure First republic, advisor recruiting remained robust, indicating resilience in the financial advisory industry. 

The tumultuous environment in banks likely spurred advisors to seek stability and growth opportunities elsewhere. This trend is expected to continue in the current year, with more advisors exploring moves to firms offering better support and prospects for their practices. 

The allure of independence and the ability to provide personalized service to clients continue to drive advisors away from traditional banking institutions. Firms that prioritize advisor support and flexibility are likely to attract a significant share of talent in the upcoming months. Amidst ongoing industry shifts, the importance of robust support systems and adaptable business models cannot be overstated for both advisors and the firms competing to recruit them.

Finsum: Advisors are making changes in 2024 mirroring the flexibility desired in many other job categories. 

Following the collapse of First Republic, many believed that there would be a negative impact on financial advisor recruiting. However, this concern was unfounded as more than 9,600 experienced advisors switched firms last year, which was a 7.5% increase from 2022 according to a report from Diamond Consultants. 

Jason Diamond, executive VP of Diamond Consultants, authored the report. He considers an experienced advisor to be one with a minimum of 3 years of experience. He believes that the healthy recruiting figures reflect that advisors are ‘taking a long-term view of the business in terms of what move will best position them for the next five years, not just today.” 

The two biggest moves were a team from UBS, managing $5.5 billion in assets, moving to RBC, and a private banking group at Bank of America, advising on $4.5 billion in client assets, joining Fidelis Capital, an independent wealth management practice. 

Most moves were within the same channel, such as wirehouse to wirehouse, even though many headlines focus on large teams going independent. For 2024, expectations are for another strong year of recruiting, although weakness in financial markets could lead to less activity. Many wealth management firms now offer multiple affiliation channels for incoming advisors. Additionally, private equity has also been getting more involved which has also pushed valuations higher. 

Finsum: Many thought that financial advisor recruiting would drop off in 2023 following the collapse of First Republic. However, this was incorrect as recruiting was up 7.5% compared to 2022. Expectations are that recruiting in 2024 should be strong as well.  

Bank of America CEO Brian Moynihan is looking to increase the profitability of the bank’s wealth management unit. He wants to achieve this by increasing scale, hiring more advisors, promoting more cross-selling of products, and investing in technology. 

In Q4, Bank of America had a net gain of 175 brokers with most of the growth coming from graduates of its training program. It ended the year with 18,916 advisors across all units which was a 2% decline from the end of 2023. The bank has also sought to stem the tide of defections over the past few years by upping compensation to match its competitors.

Moynihan wants to expand headcount and increase the bank’s presence in underserved markets. A key aspect of this is its revamped broker training which was integrated with Merril in 2021 and has increased retention rates of new advisors. 

Another element of the growth plan is to increase use of Bank of America financial products across its ecosystem. This means getting wealth management clients to use Bank of America financial products such as home loans or bank accounts, or private banking customers should be using Merrill for wealth management rather than an outside firm. He sees this as an opportunity to increase sales with minimal expense compared to other channels. 

Finsum: Bank of America CEO Brian Moynihan was positive on the wealth management unit’s performance. He sees future growth coming from adding advisors, investing in technology, and increasing cross-selling of products. 

LPL Financial was higher following its Q4 earnings report which showed the company exceeding analysts’ consensus forecast. For the quarter, it generated $3.51 per share in earnings which topped estimates of $3.39 per share. Total revenue was up 13% to reach $2.6 billion, while advisor revenue was up 20%. It also added 256 net new advisors and now has a total of 22,660 advisors.

The results were strong across the board as it saw a 22% increase in total advisory and brokerage assets, reaching $1.35 trillion. Further, it brought in $25 billion in new assets in the fourth quarter, highlighting the firm’s success in growth via acquisitions and recruitment. Another source of growth has been enterprise, where LPL manages a wealth management platform for banks, credit unions, and other institutions. Recently, it was announced that LPL would become the brokerage and wealth management platform for Prudential Financial which counts $50 billion in assets and 2,600 financial advisors. 

The firm is also looking to expand with the launch of LPL Private Wealth Management which intends to hire advisors as employees rather than as independent contractors. It believes its multi-channel approach is a differentiator and key to its success as it means the firm can appeal to all types of advisors. 

Finsum: LPL reported strong Q4 and full-year earnings which exceeded analysts’ estimates and sent the stock higher.