Advisors routinely ask us about the changes we see in the wealth management industry as they relate to advisor movement and deals. Questions like:
- Where are deals headed?
- Which firms are the most successful recruiters?
- Which firms are losing top talent?
- Which business models are advisors finding most attractive?
And the truth of the matter is, we couldn’t find a single source to share those answers on a regular basis.
So, we created our own.
The second annual installment of the Advisor Transition Report sheds light on the significant trends in advisor movement during 2023. Essentially, it’s competitive intelligence drawn explicitly from analysis of raw data, coupled with insights designed for advisors—regardless of whether they are considering change or not. Even if you have no intention of changing firms or models, understanding key trends around recruiting and transitions will help you become a smarter advisor and a better steward for your clients.
Each year, the raw data turns up a few notable surprises that we might not have otherwise realized. Here are the five biggest surprises we found:
- Recruiting was up modestly on a headcount basis—we even saw many marquee multi-billion dollar transitions.
Why this surprised us: Amid an incredible bull run in equities and many advisors enjoying record success, we might have guessed that advisor movement would be down slightly. After all, when advisors are enjoying the status quo, why upset the apple cart? The regional banking crisis very reasonably could have impacted the number of advisors making a change—but apparently, it did not.
Why it played out this way: Because advisors are increasingly long-term oriented (especially the largest teams in the industry). It’s not enough that they feel well served today. They wonder if they are in the right place to maximize the value of their business 5, 10, or even 20 years from now.
- Every channel had a notable winner.
Why this surprised us: We expected large independent firms like LPL and even traditional behemoths like Morgan Stanley to have success. Yet the relatively small advisor populations at boutique and regional firms—headlined by Rockefeller, RBC, and Raymond James—led us to believe that, on a headcount basis, these firms would not be meaningful players. We were wrong.
Why it played out this way: Regional and boutique firms are increasingly viewed as the perfect middle ground with the scaffolding and support of a traditional wirehouse minus the red tape and bureaucracy. And with deals that, in many cases, match or exceed their wirehouse peers, it’s no surprise they have enjoyed more success. An interesting and related corollary: Regional firms moved up market in a meaningful way, with the single largest transition of 2023 being a wirehouse to regional move (UBS to RBC).
- Even the “losers” won some.
Why this surprised us: We have the benefit of a bird’s eye view of the industry landscape, and, in our experience, it can feel like some notable firms never win any meaningful recruits. For example, Merrill and Edward Jones commonly appear on the loser’s side of the headlines and rarely seem to be pulling the big fish. But this is exactly why the raw data is so critical: The press releases and news headlines don’t always tell the whole story.
Why it played out this way: There is no such thing as the “perfect” firm. Equally true, no firm is all bad. That’s what makes a horse race. Even a firm that many advisors find unappealing likely has a value prop that will resonate with some in the industry. And we saw that in 2023: The firms that lost the greatest number of advisors gained some meaningful wins, too.
- Private equity has been slow to figure out the wirehouse puzzle.
Why this surprised us: Private equity has been a significant and looming presence in the wealth management industry for years. Most of the largest and most successful RIAs on the Street are PE-backed. However, these firms have been talking for some time about recruiting wirehouse advisors directly (without the interim RIA launch step). We would have expected that with their infinitely deep pockets and tremendous deal-making expertise, they would have already figured out a way to solve for the wirehouse breakaway. But the movement data shows very few such transitions.
Why it played out this way: Perhaps we were a bit early, and 2024 will be the year of the PE-wirehouse recruiting trend. Yet these potential deals also have some notable shortcomings. Namely, an advisor is forced to sell equity at a nadir, and they lose a great deal of future optionality by tying their ship to private equity right out of the gates. Plus, as we saw several times this year, private equity money comes with plenty of strings and caveats—and advisors know it.
- Increased transition dollars and support in the independent space did not lead to a deluge of breakaway activity.
Why this surprised us: We still saw plenty of advisors leave a captive channel for an independent channel, but the rate appears to be slowing slightly. And that’s contrary to what we would have expected because a.) independent firms are offering more transition dollars than ever before, and b) there are so many new and exciting flavors of independence that will support virtually any and all parts of the business that an advisor desires.
Why it played out this way: In part, this is likely a natural business cycle playing out. Independence was “all the rage” for a few years and continues to be very popular. Still, the early movers and shakers have already de-camped, and many advisors who remain in a captive channel simply view themselves as better suited for employee models. And while the increase in transition deals is nice, these deals still don’t come close to competing with the 300%+ deals offered by most traditional firms, including wirehouses and regional firms (independent firms offer transition deals typically ranging from 30-100% of an advisor’s annual revenue).
The numbers don’t lie when it comes to where, why and how advisors are changing firms. But the gold isn’t in the numbers themselves: It’s the information gleaned from the trends they represent. Advisors everywhere can benefit from understanding the activity of their peers and firms. Within each trend lies a key indicator of where the industry is heading, and that knowledge alone helps to define how you serve clients and grow your business today and in the years to come.
Jason Diamond is Vice President, Senior Consultant of Diamond Consultants—a nationally-recognized recruiting and consulting firm based in Morristown, N.J. that focuses on serving financial advisors, independent business owners and financial services firms.