Here we go again. Three of four of the major wirehouses have sworn off sky-high recruiting deals.

Yet this isn't the first attempt firms have made to put an end to costly poaching.

Back in the 1990s, Smith Barney boss and arm-twister-in-chief Sandy Weill tried to get his competitors to forsake the Wall Street custom of paying up big for top financial advisers. But even the famed tough negotiator Weill couldn't keep his competitors in line. Within six months, it was every man for himself in the recruiting wars.

Today, Wall Street firms are under the gun to trim overhead; the low-rate return environment is hitting their bottom lines. UBS got the ball rolling when it announced in June 2016 that it would scale back their adviser recruiting efforts. Merrill Lynch and Morgan Stanley have also recently said that they will no longer offer advisors the hefty 250%-plus packages that they routinely paid for years. Merrill Lynch reportedly told managers that it would instead focus on hiring "up-and-comers" with three to eight years of experience.

But demographics and competitive forces are destined to weaken the determination to avoid expensive recruiting packages. Issue No. 1: The aging adviser workforce. According to Cerulli Associates, the average age of a wirehouse adviser is above 53 years; approximately 41% of advisers are more than 55 years old.

Retiring advisers will need to be replaced. Adviser trainees, however, are hard to find. Millennials typically prefer careers in favor of high tech startups or other hot careers. Training new advisers, even with a team approach, is still a multi-year, dicey proposition.

Which explains why, even now, the recruiting shutdown is far from absolute.

Slideshow
Advisers on the Move: Brokers with $6B in AUM join Merrill Lynch
Though the wirehouse notched impressive wins, Merrill wasn't the only firm to land elite recruits recently.

Privately, branch managers acknowledge that "franchise players" ― fee-based advisers with more than $1 million in gross production in targeted locations ― will still be able to command stratospheric deals. That makes sense. The wirehouses will always be looking to selectively upgrade. The average level of gross production at most wirehouses is right around $1 million, excluding trainees and so-called up-and-comers. Merrill Lynch has more than 14,000 advisers and Morgan Stanley has over 15,000. Selective upgrades to a salesforce make sense.

Regional firms and independents are positively gleeful about the wirehouse recruiting retreat and view it as an opportunity.

Wells Fargo, alone among the wirehouses, has boosted its recruiting packages to capitalize on the absence of its competitors in the marketplace. Invariably, I believe the other wirehouses will find their pullback difficult to sustain. Over time, it's likely that wirehouses will broaden their criteria for new hires and focus on offering big deals to fee-based advisers who are growing at a solid clip or those advisers who have amassed significant pools of assets.

In the meantime, advisers who have no longer see wirehouses as a viable option are busily exploring other avenues. They are discovering a multitude of options elsewhere and an opportunity to reconsider the business model that makes the most sense for them. Most importantly, in my experience, when advisers choose to affiliate with firms at which they are valued and respected, they are much happier.

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