Last year was a good time for advisers looking to moving firms. A record-setting stock market combined with competition from firms across all channels created high demand for advisers. On the flip side, thousands of older advisers closing in on retirement, combined with continued slow progress of rookies entering the business, supply was low in this labor market.
Result? These trends parlayed into generous offers for advisers, particularly those with transferable books of business. Indeed, top advisers saw offers as high as 150% of trailing-12 in up-front packages. I expect the supply-demand mismatch to continue, and even grow, this year to create an even better market for FAs looking to make a change, and even more difficult for firms to find the producers they’re looking for.
The prospects of a very strong stock market under a Trump administration (due to lowered corporate and personal taxes and reduced regulation), the demand for investment help from the public should grow, perhaps significantly so.
One of the major question marks in the bank channel (and all channels) is, of course, the impact of DoL fiduciary standard. Despite this significant unknown hanging over the industry, I’ve seen little if any impact on recruiting. Despite the new administration’s recent moves to rescind the new mandates, questions still about and firms, at the very least, still need to replace retiring FAs and meet the needs of both their existing customers as well as build new relationships with GenXers and millennials as they increase their wealth.
Even without the DoL, the industry will continue to be under pressure on fees, technology costs and regulatory burdens. Because of these unknowns and continued pressures on firms to reduce costs and provide more cost-effective services, look for continued growth and acceptance of robo advisers. Particularly at the low-end of the market, robos can be an effective tool to meet compliance requirements, and deal with the FA shortage, as well as cost pressures. More banks and TPMs will be adding some form of robo function to their platforms over the coming year.
Banks need to continue to look within (promoting from the platform, junior adviser programs, and stepped-up training), and must make FA recruiting a full-time activity. Only through a constant and vigorous recruiting program will program managers find those advisers who are dissatisfied with their current program, or want the benefits a quality bank program can provide.