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With recruiting surge, regional BDs get their moment in the sun

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After a year of big recruiting wins, regional broker-dealers are finding similar success in 2019.

The latest example: Baird pulled in a Wells Fargo team that managed $381 million in client assets. The Elgin, Illinois-based group — comprised of Robert Schrieber, Terry Foster, John Wedell, and Scott Komaromy — generated more than $2.89 million in annual revenue, according to Baird.

The team follows in the footsteps of more than 400 advisors who joined regional BDs last year, according to hiring announcements and BrokerCheck data analyzed by On Wall Street. The data does not include all hires. Of the confirmed moves, recruits managed a total of more than $45 billion, according to their new employers.

“If you look at the past three years, these firms have really decided to turn on the recruiting spigot. They’ve improved their technology and stepped up their recruiting deals,” headhunter Rob Blevins says, pointing to Stifel, RBC, Baird and Ameriprise in particular. “I think there’s also a willingness to open new offices or satellite offices. The wirehouses aren’t doing that.”

Baird’s newest hires joined a branch that opened last year. The Milwaukee-based firm launched new wealth management offices in six other locations in 2018, bringing its total number of branches to 98. Other regional BDs, such as Raymond James, have also been opening new offices, putting them on a more competitive footing with their larger wirehouse competitors. Raymond James has expanded its employee broker-dealer unit into the new regions such as the West Coast and Northeast.

Advisors making the move cited recruiting deals, tech upgrades, corporate culture and promises of more flexibility in how they manage their practices. Industry observers also note another change since the financial crisis: Wirehouses are now owned by large banks, reducing the wealth management units to just one piece of a larger revenue puzzle.

“The individual advisor feels more valued at a smaller firm and that’s really powerful,” says recruiter Danny Sarch.

Another factor contributing to regional firms' recruiting success are Wells Fargo’s attrition problems. More than half of regional BD hires last year came from the wirehouse, fueling a hiring surge at regional and independent firms.

Wells Fargo has suffered from advisor attrition since a phony accounts scandal and other regulatory issues came to light in 2016. The company’s brokerage ranks, which include advisors in multiple channels, declined to 13,968 for the fourth quarter of 2018 from from 14,544 for the same period a year before. Headcount has fallen by a net 1,118 since the third quarter of 2016.

The following 17 teams oversaw about $75 billion in assets. The firms ending the year with prize recruits include a diverse cast: regional BDs, wirehouses, boutiques and RIAs.
December 14

Of course, Wells Fargo is also trying to recruit. The firm picked up five advisors from rival Morgan Stanley last month. Robert DeBlasio and Steve Rodman signed on with Wells Fargo in Boca Raton, Florida. Eric Johnson and Brooks Collins joined in Huntsville, Alabama, while T. Scott Robertson joined the company in Ridgeland, Mississippi, according to a spokeswoman who declined to provide the advisors’ AUM. The spokeswoman also declined to comment on the firm’s departures.

These efforts haven’t successfully stemmed the decline in headcount at Wells Fargo..

Ramped up hiring efforts at regional BDs, however, have paid dividends. Raymond James reported record headcount for the fourth quarter of 7,815 employee and independent advisors. Baird says it picked up 62 advisors last year, a dozen of which came via an acquisition of a small broker-dealer. The Milwaukee-based firm says it has client assets of $140 billion and approximately 890 advisors. That number is set to rise with its pending acquisition of Hilliard Lyons, a 380-advisor firm based in Louisville, Kentucky.

Of course, wirehouse troubles may not persist forever and the big firms aren’t idle bystanders to industry change. Wells Fargo, for instance, recently launched an RIA channel to win over the quickly growing industry segment. Regional BDs’ rapid expansion could also imperil one of their chief selling-points: Their tight knit, small firm feel.

"The challenge for a smaller firm is to feel small even as they grow. I think that challenge is real for those firms. But they have a while to go before they reach that point,” Sarch says. “As long as they solve for the problems of a wirehouse advisor, then they’ll have room to grow.”

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