Independent brokerages and registered investment advisory firms are winning the financial advisor recruiting race, according to a study by ISS Market Intelligence. The study revealed that over the past five years, these two channels have seen the largest net increases in registered representatives, with more than 39,000 representatives switching firms last year, marking a three-year high.
The trend towards independence and flexibility has been driving this movement, with factors such as frequent M&A deals, attractive recruiting offers, and a desire for autonomy playing a significant role. However, the success of independent brokerages and RIAs may also pose retention challenges in the long term, as some RIAs function more like wirehouses than independent entities.
One Clear Winner, but Plenty of Advisor Movement
Out of the top 10 firms in terms of net gains of reps in the past five years, half are independent brokerages. LPL Financial emerged as the top firm in terms of net rep additions, outpacing its competitors by more than 6,000 representatives. The company’s aggressive recruitment strategies, competitive payouts, and technological investments have contributed to its recruiting success.
A Much Different Industry from 15 Years Ago
The industry landscape has undergone significant changes over the past 15 years, with a shift towards independence and a decline in brokerage-only registration. The number of reps registered with an RIA has more than doubled since 2010, while the number of brokerage-only reps has decreased by 41%. This transformation was catalyzed by the 2007 repeal of the “Merrill Lynch rule,” allowing wealth management firms to collect commissions for advisory services.
Demographics Suggest Continued Movement
The study also highlighted the demographic trends driving advisor movement, with a growing number of experienced advisors nearing retirement age. Succession planning and the need for exit ramps from the industry are expected to fuel further movement in the coming years. More than 100,000 reps, representing 14% of the total industry, have tenures of at least 32 years in finance.
The Continued Momentum Toward Independence, with an Asterisk
Despite the increasing trend towards independence, the industry is also witnessing consolidation, as intermediaries are expected to take a more holistic approach to client goals. RIAs and independent brokerages are attracting teams from employee channels, but the need for scale and resources may lead them to operate more like traditional firms. Advisor moves between firms in the same channel remain the most common type, driven by factors such as higher payouts, independence, and better technology.
