The Real Message Behind the Movement of $1 Billion Teams

#Lifestyle Wealth


Advisor movement among the top producers in the industry—those from traditional brokerage firms and banks who are managing $1 billion or more in client assets—is on the rise, with 25 of these uber-teams having moved in 2018. And while these teams seek greener pastures to grow their businesses, the rest of the industry can learn from this wave of movement.

First, it’s noteworthy that so many large teams moved at all: Historically speaking, those in the “Billion Dollar Plus Club” were the least likely to move. For those teams that did move, it was typically from one brokerage firm to another, as these folks strongly believed that the wirehouses were the only place to serve wealthy clients. And it didn’t hurt that the recruiting deals were quite lucrative as well.

Today it’s a very different story. Just six of these 25 teams moved to another big brokerage. The rest opted for independent models or boutique firms, like J.P. Morgan Securities or First Republic Wealth Management.

There’s little doubt that we’re in the midst of another evolution of the landscape, and it’s trends like this that serve as harbingers for what may lie ahead for the industry at large. Consider these four points:

The reverse effect: While brokerage firms tighten the handcuffs that keep advisors captive, the result has been the opposite. Advisors value freedom, flexibility and control more than anything, and will do what they need to grow their businesses and serve their clients with autonomy.

Business mindset: In the last decade or so, top advisors have placed a greater focus on thinking of their businesses as businesses. That’s why so many are exploring the registered investment advisory space, which offers them the opportunity to build equity, self-brand, maximize enterprise value and gain greater freedom and flexibility to run their businesses as they see fit.

The best deals: Firms like J.P. Morgan Securities and First Republic Wealth Management are winning the race for top talent. They’ve picked up the mantle from the wirehouses by offering high watermark transition deals and their names are very attractive to the industry’s best.

A leveled playing field: With wirehouse deals down from their peak, the playing field has been leveled for regional firms that once offered transition packages that were much lower than their big firm counterparts. And less transition money offered by the wirehouses makes independence that much more attractive.

The Net Effects of Change

Departing from the broker protocol, shoring up non-solicitation agreements, deferring compensation, and mandating garden leave are strategies implemented by big firms to stave off attrition. Yet, as firms tighten their grip, advisors are feeling the pain.

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When an advisor’s ability to serve clients becomes restricted—and the opportunity to realize the full potential of their business is diminished—they seek other avenues. And the changes we’re seeing at the banks and brokerages are fueling their exploration.

It’s important to take notice of the movement and momentum of these big teams as they typically serve as proxies for the industry. The rest of the advisory world looks at them as the “first wave,” that is, the biggest and bravest paving the way for the rest of the population.

The momentum behind big team moves is one we expect to continue and along with it, a surge of advisors at all levels who are seeking alternatives to have greater freedom and flexibility. Stay tuned. 

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