Recruiting in wealth management was a mixed bag in 2023. Tailwinds like advisor demographics and a bump in cash sweep income for broker-dealers were countered by headwinds including high interest rates and increased competition. Activity lessened to a degree, but large deals were executed, with those players possessing the foresight, scale and resources to tackle the challenges and capitalize on the opportunities winning the day.
Consolidation remains a driving force as broker-dealers, serial acquirers, family offices and RIA aggregators continue to build scale and fill gaps in their offerings. Though there is no real consensus on macro factors impacting the economy and markets in 2024, dealmaking is likely to pick up, as aging advisors eye the exit doors and buyers and sellers remain active.
WSR checked in with four wealth management industry veterans whose firms consistently enjoy recruiting successes to get their perspectives on the recruiting ecosystem today and what they expect going forward.
- Kristen Kimmell, Executive Vice President, Business Development, Osaic, one of the nation’s largest providers of wealth management solutions
- Neil Turner, Co-Founder and Co-CEO, NewEdge Advisors, a leading RIA based in New Orleans
- Vince Fertitta, President, Sanctuary Wealth, an advanced platform for the next generation of elite advisors
- Timothy Boostrom, Business Development Managing Director, Stifel Independent Advisors, a premier independent broker-dealer
WSR: What are your thoughts on the state of recruiting for large broker-dealers going into 2024?
Kimmel: Advisors expect more and need a firm that can deliver best-in-class technology platforms, investment solutions and practice management consultations, as well as strong community and meaningful culture.
Since launching our new brand, more than half of our advisors successfully made the transition to Osaic. While change often feels daunting, our advisors are seeing the benefits of partnering with a unified firm where they’ll have over 2,500 home office employees supporting their clients’ success. Our scale and well-known approach to supporting our current advisors is a major contributor to the recruited assets in the second half of 2023 at nearly double the recruited assets in second half 2022.
Yet what seems to be resonating across many of these deals is our commitment to support our advisors today and help them get to where they want to be in the future. From capital support to grow their business, to consulting services and opportunities to partner with retiring advisors to secure additional books of business, our scale, coupled with the dedication to the individual advisor, presents a unique and compelling offering.
As we look to 2024, I fully expect the focus on community to continue. While emergent technology like AI-enabled solutions and automated back-office tools will grab headlines, this industry cannot ignore the fact that it remains relationship driven. Most discussion of these relationships falls upon the advisor-client side of the wall, but how a firm works with its advisors and empowers them to work together to build a stronger business is just as important.
WSR: What are the recruiting challenges you see in 2024?
Turner: We saw robust recruiting activity throughout 2023 and I believe that will continue this year, but there will continue to be challenges. It just so happens that challenges for firms entering 2024 are anything but challenges for financial advisors – they have more choice than ever when deciding where to affiliate. As it relates to recruiting to our independent channel, we are seeing the maturation of aggregators we compete with as they transform from startups to truly resourced enterprises.
In our employee model segment, we are seeing the re-emergence of great employee options as Morgan Stanley has retooled and traditionally independent firms like LPL take leaps in the W-2 space. These factors will create recruiting challenges in the more traditional recruiting segment which will require us to innovate to stay ahead of the curve.
In the M&A segment, we expect to see a shift of focus from firms purchasing retiring advisors at the end of their careers to zeroing in on what we call “unicorns,” who are Next Gen advisors with long career runways ahead. At the same time, firms considering an M&A deal may find their Next Gen advisors souring to their rinse-and-repeat succession plan – especially if institutional capital is involved. Why? Firm leaders who align with PE-backed aggregators leave their Next Gen team members with nothing to sell in their future succession process.
How can the industry resolve this potential impasse?
Firms will have to develop programs that not only attract Next Gen advisors but also provide a favorable payout structure that fosters growth. We understand the push-and-pull nature of recruiting challenges, so we created a robust program that fosters a meaningful partnership between our firm and Next Gen advisors. NewEdge Advisors’ solution provides a financial incentive for high-performing early-career wealth managers to remain with our firm as we grow together. This works for our teams and has contributed to our continued success, including another year of record recruitment and asset growth in our three-year history.
WSR: How would you describe the wirehouse breakaway recruitment process in 2023? What were the most consistent issues you faced and what do you expect to see in 2024?
Fertitta: Advisors seeking control dominated this past year – control of their future, control of the advice they give to clients and control to build their businesses as they see fit. From the collateral damage of the First Republic bank failure to the multiple transactions over several years impacting those working at United Capital, as well as those feeling the pressure from bank owners at the wirehouses, advisors have told me that they want to take back control of their business and get back to what matters most – supporting their clients.
An interesting theme we noticed gaining traction in the later part of 2023 was the inability of some at larger institutions to support their international clients and choosing to partner with a firm that would allow them to service these clients and further expand their practice. This is a complex issue, with several convoluted regulatory considerations to weigh. But, again, this comes back to control.
As we look toward 2024, I expect advisors to take action to wrestle back control. Be it through partnerships with firms like Sanctuary or choosing to launch their own RIAs, I believe the sustained trends of the past several years toward independence are just the beginning. The question will be how advisors accustomed to working for larger institutions who are suddenly thrust into a completely unstructured environment thrive.
At Sanctuary, we offer a Partnered Independence model that helps these complex practices establish their businesses, provides access to best-in-class technology and solutions and more, while staying out of the way of the decision-making process. It gives them all the control they need while taking care of the operational complexities of running a wealth management firm.
WSR: As recruiting remains a core focus for independent broker-dealers, what are Stifel Independent Advisors’ priorities?
Boostrom: Our priority is finding a “fit.” We believe it’s important to articulate our culture early in the recruiting process. We get to know our prospective advisors personally, doing more than just a deep dive into their businesses. By focusing on principles, values and norms up front, we can begin a relationship with a new advisor based on personal and professional goals beyond money. By assuring there is a mutual fit, both parties have a better chance for long-term success.
Many of our recruits care deeply about culture. Yes, they want to know about payouts, technology stacks and transition support, but those details often no longer lead the discussion as in the past. We see values-based decision making in recruiting continuing, as the industry’s evolution, consolidation and overwhelming drive for scale upend the established cultures of many firms. This is sending advisors in search of options that better complement their beliefs and approach.
Stifel Independent Advisors has been successful in attracting new advisors by leading with our culture. Many firms list their features and call it culture. But by including everything from service models to practice management in culture, they are defining it incorrectly. Our values are established at the top and permeate throughout our firm. It’s not “what” or “how” we do things, it’s “why.” And for us the “why” is to profoundly impact people’s lives. We believe recruits will continue to find this compelling, especially Next Gen, women and those from underrepresented communities.
Recruiting: A Constant Pursuit In An Evolving Environment
Recruiting will remain highly competitive in 2024. Those firms that hope to succeed will need to be adaptable and have the ability to recognize and fill needs, whether it’s for enhanced technology, affiliation models or community-building values. The potential for a lower cost of capital should help more deals get done by a broader range of firms. This will keep advisors, especially those with large books of business and recurring revenue, in a strong position.
Wealth management firms of all sizes must remain nimble, flexible and have a solid understanding of the environment if they want to come out on top in the new year.
Janeesa Hollingshead, Contributing Editor at Wealth Solutions Report, can be reached at editor@wealthsolutionsreport.com.
