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Why Raymond James, Stifel gain ground at wirehouses’ expense

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Why are so many advisors signing on with regional BDs and independent firms?

To understand why small is trumping big in wealth management, we need to look at what happened to clients during the financial crisis. Prior to 2008, wirehouses with big names ruled the roost. Clients felt comfortable knowing their money was managed by a big brokerage or bank. It didn't matter who their advisor was. In the mind of the client large firms were synonymous with high returns and security.

That all changed with the financial crisis. This period exposed the distasteful underbelly of how big firms were actually managing their clients’ funds and their organizations. Client loyalty eroded. Now clients are focusing more on their relationships with their advisors. Further, the crisis proved to clients and advisors that bigger is not always better and that firm culture is more important than size.

You can see how this has played out in advisor movement between firms. The big banks are experiencing high attrition, according to year-to-date pulled from an internal report we ran at Elite Consulting Partners for our July 2019 newsletter. Through Q2 of 2019, Merrill Lynch saw 372 moves, Well Fargo saw 395 moves, and Morgan Stanley saw 280 moves. Compare these numbers to firms such as Raymond James and Stifel, which have hired 328 advisors and 97 advisors, respectively, according to our data. I’ve experienced this movement myself in helping move large advisors to Raymond James and Stifel and away from firms like Wells Fargo and Morgan Stanley.

Of course, these are not the only firms hiring talented advisors, but what is clear is that firms who put the advisors first are becoming today’s financial services leaders. What does putting advisors first look like? It’s creating business models focused on managerial transparency, advisor autonomy and accountability, and client-focused services and solutions.

The biggest challenge for larger firms moving forward, if they wish to stay competitive, is organizational change. It’s hard to do within existing structures. The culture of putting profit first over advisor and client needs is so ingrained that it makes it difficult to enact any meaningful change with expediency.

The firms that have been building an advisor and client first mentality, like Raymond James, Stifel and others, are now reaping the benefits of that approach. Instead of these firms following the wirehouses’ lead, they have forged their own path by building a sustainable firm culture that simultaneously drives revenue. Those benefits have proved to be substantial. Advisor attrition from large firms has enabled these emerging firm power players to staff their teams with some of the best and the brightest.

What we are really talking about is which firms have a culture that puts advisors and clients first and which firms do not. It is just that simple — and just that hard — to achieve.

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