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2016: 8 Trends Aligned to Work in Your Favor


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Taking a step back to understand what lies ahead for financial advisors and the industry as a whole

What a year! With 2015 almost in the books, it’s time yet again to reflect upon the past 12 months and consider where we are headed in 2016.

2015 was indeed a news-filled and somewhat scary year on the world’s stage, starting and ending with terrorist attacks in Paris, and in between a nuclear deal reached with Iran, a migrant crisis in Europe and a Russian passenger plane crash in Syria. From an industry perspective though, it was an exciting year with far more positive notes as we watched some of the top financial advisor teams in the industry make moves.

2015 Theme of the Year: The Great Migration of the Whales

With so many multi-billion dollar advisors changing jerseys in the past 12 months, 2015 may very well be known best for “The Great Migration of the Whales”. Some of the highlights of these headline-making moves include:

  • $6.5B Stephans, Van Liew and Oiler jumped from Merrill Lynch to Morgan Stanley’s Graystone Consulting unit
  • $3B Chris Mahoney team moved from Merrill Lynch to Raymond James
  • $3B Dave LaPlaca transitioned out of Deutsche Bank to independence with Dynasty Financial Partners
  • $1B Dagny Maidman moved from Credit Suisse to First Republic Bank’s wealth management unit

Where the majority of the “whales” went is most noteworthy. Sure, many advisors jumped from one wirehouse to another but, from my perspective, there were 3 standout winners in the race for top talent this year: Raymond James, First Republic Bank and independence in all of its forms.

It felt like almost every day we saw another press release from RayJay announcing the recruitment of another top advisor. The firm has really solidified its place on the main stage and become a legitimate landing pad for high quality advisors across the country.

First Republic caught our attention in 2012 when they acquired the $5B+ RIA, Luminous Capital, and yet again only a few months ago when they purchased a second $6B+ RIA: Constellation Wealth Management. The bank’s wealth management unit seems to be on an acquisition and recruiting tear and Bob Thornton, the unit’s President, tells me that their pipeline is bursting at the seams with some of the industry’s best and most productive talent.

And then we look at the independent space. To call it independence has become a misnomer because an entire cottage industry has been born to support a new generation of entrepreneurs. By my calculations, there were 19 deals done this year alone by just 4 of the top firms in the space, recruiting advisors who individually managed more than $250mm in AUM: 6 by Dynasty, 5 by HighTower, 6 by Focus Financial, and 2 by Robby Stephens. And I’m not even counting deals done by William Blair, Snowden Lane, and advisors who went directly to the custodians.

2016: It may very well be “The Year of the Advisor”

The events of 2015 set the stage for what looks to be a strong and active coming new year for all advisors. It’s not often that we see so much activity this late in the year, but many advisors are seeing the writing on the wall: the firms they once knew have been sold or are in the process, and the “job” they once had looks nothing like it did. And that’s OK, because one thing is for sure: opportunity abounds! And advisors are no longer waiting for the next shoe to drop; they’ve learned that their fate rests in their own hands, so they’re exploring their options.

To be sure, here is our forecast for 2016, which is likely to be deemed “The Year of the Advisor”.

  1. Big Bucks from the Wirehouses
    It’s likely that transition packages offered by the wirehouses will remain at high watermarks because increased competition for top talent from non-core players will force them to pay big money if they want to have any shot with the advisors they most covet.
  1. Free Agents Shop Around
    With more than 7,000 advisors entering free agency in early 2016 as their retention packages forgive, the wirehouses will be particularly vulnerable to attrition. Add on a greatly expanded industry landscape and the independent space becoming such a viable option for top-of-the-food-chain-folks, you can bet that senior leaders and branch managers at these firms are plenty worried.
  1. Big Brother Tightens the Reigns
    The changing regulatory environment will likely force the big firms to become increasingly hyper-vigilant and manage even more to the lowest common denominator. And the exceptions and “one-off” arrangements regularly made to keep the most productive advisors happy will become much less routine.
  1. IBD Shake-Up
    Regulatory pressures will force more contraction in the independent broker-dealer (IBD) space.   The firms with scale will thrive, but those not able to invest significantly will fall prey to an increasingly discerning advisor force who expects cutting edge technology and greater support. Advisors who practice under IBD umbrellas that have decent books of business will have their pick of the litter in terms of where they can go: to bigger and better B-Ds, to the RIA/hybrid space, or even back to W-2 land.
  1. Buying Spree
    There will be more mergers and acquisitions in the RIA space as it will be harder and more expensive for a standalone firm to remain relevant and profitable. And as the advisor population rapidly ages, we expect to see more succession-driven transactions than ever before. There is no shortage of acquirers as these folks are optimistic about their businesses and know that paying top dollar for an annuitized revenue stream is a smart and strategic endeavor. Banks will be especially acquisitive, as they want in on the action.
  1. RIAs vs Robos

In the RIA space, there will be a shift towards wealth management and financial planning, and away from pure-play portfolio managers as robo-advising increases competition and drives prices down even further.

  1. The Declaration of Independence
    More wirehouse talent will join the migration to the independent space. And, it will continue to be top-of-the-food-chain folks who will lead the way. Up until relatively recently, it was only the advisors that were bitten by the bug of entrepreneurship, but now senior leaders and branch managers want in on the action too, and are looking to “skate where the puck is heading.” As a result, we will see a number of new firms born offering a combination of cash and equity plus turnkey support to entice would-be breakaway advisors. This will mean that the trailblazers in the independent space – like HighTower, Focus, and Dynasty – will need to really up their game. No doubt, these firms are deep in the lab coming up with creative ways to retain their reputation as the go-to destination for top talent.
  1. Quality of Life
    Advisors value freedom, flexibility, and control more than anything else. Conversely, nothing frustrates them more than being limited in some way and having to deal with nonsensical bureaucracy. Firms like Raymond James (who has had banner years from a recruiting perspective) offer much less aggressive transition packages than their wirehouse competitors. Their success is explained by the fact that advisors fall in love with the firm’s culture and commitment to putting them and their clients first, and shareholders a distant second—so they are willing to forego some short-term upside in return for a better quality of professional life.

Understanding where we’ve been – with some forethought on what lies ahead – will allow you to sort the noise from the news. So head into 2016 knowing that the balance of power still rests with you, the advisor, and the opportunity to create the business life of your dreams is well within reach.

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