In the recruiting wars for top advisors, banks have traditionally shied away from wirehouse firms, viewing the advisors there as out of reach.  But now banks are getting bolder as they fight to overcome their inferiority complex and begin to play to their strengths.

In a major catch late last year, First Dakota National Bank, a community bank based in Yankton, S.D., made waves when it reeled in a top-producing father-and-son advisory team from UBS Financial Services. The team produced more than $1.6 million in annual fees and commissions and had $325 million in assets under management.

The two were attracted to the bank for a variety of reasons, the biggest being the opportunity to grow their business through referrals and warm leads,  according to Rob Ness, program manager at First Dakota, which uses Raymond James as its third-party marketing firm.

“They were intrigued by the chance to further expand their business even more,” he said. “It opened them up to a whole new level of clients they currently don’t have.”

The team joined the bank’s newly formed high-net-worth unit called Loft Advisors, which gave them the opportunity to get in front of wealthier people, Ness explained.

As competition for talent intensifies, more banks like First Dakota are increasingly looking to the wirehouses as possible places to recruit. “We’re hearing more stories about banks pursuing wirehouse individuals. Maybe we opened the door a little bit in Sioux Falls,” Ness said, referring to the bank’s largest market. 

A More Meaningful Part of Hiring

Frank Smith, vice president of Advisor Recruiting for LPL Financial Institution Services Division, agrees that the number of banks targeting wirehouses is on the rise. Recruiting from wirehouses has become a much more “meaningful part” of hiring among the 724 financial institutions whose investment programs LPL supports, Smith said, without specifying actual numbers. “Historically the percentage of recruits going from wirehouses into community institutions was almost nonexistent,” he said.

A lack of appreciation for what bank investment programs offer wirehouse advisors has held banks back, said Smith. For the past two years, he has overseen an initiative to educate banks and credit unions about how they should be positioning themselves to attract wirehouse advisors. “The problem we’re seeing in the community bank space—at least historically—has been the community bank’s mindset.  They didn’t feel like they had an attractive value proposition to offer to the wirehouse advisor that they put on some pedestal,” he said.

The educational effort has paid off, with banks “shifting their thinking to more sell and promote the opportunity of working with a financial institution,” Smith said.

Smith’s experience is consistent with a survey of 34 bank broker-dealers that consulting firm Aite Group conducted last year. The firm found that 24% of financial consultants had moved from a wirehouse, up from 11% the year before.

Rick Rummage, founder of the consulting firm Rummage Group, has seen a “ton” of activity in bank clients asking for wirehouse advisors in recent years. “It is something that is such a big push at many of the banks,” he said.

Biggest Banks Pushing Hardest

To be sure, the largest banks are pushing the hardest for wirehouse advisors.  “All banks like to hire from the wirehouses but the bigger banks are the most aggressive,” said Rummage.  He noted that only 10% to 20% of banks offer the upfront money often required to attract top-performing advisors.   So far, banks have had the most success with less experienced, lower producing advisors looking mainly for referral opportunities. The majority of the recruits for financial institutions partnering with LPL, for example, have been those with three to five years of experience, said LPL’s Smith.  However, he added, the banks are willing to talk to advisors with a broad range of wirehouse experience, including those with substantial books of business who might be looking for a culture change or a long-term succession opportunity.

Britt Borders, a program manager at Capital Bank, a small Miami-based regional bank that uses LPL as its broker-dealer, says that while he isn’t specifically targeting people from the wirehouses, three of the 10 advisors he hired in the last 10 months were from Morgan Stanley. Two of the three Morgan Stanley recruits were less-experienced advisors, producing about $250,000 each.  But the other was a $400,000 producer who despite his 12 years of experience was having a hard time coming up with leads.  The fact that he disliked prospecting made Capital Bank appealing, Borders said.

Bank Referrals a Big Draw

Indeed, the opportunity to get good leads from the bank is probably the biggest draw for wirehouse advisors looking to grow their books of business, according to recruiters and other industry experts. “I could see how a wirehouse advisor who may not be doing great as a salesperson – as a client acquisition person – could see the bank channel as being attractive,” said Sophie Schmitt, a senior analyst with Aite Group.

For wirehouse advisors who want to boost their growth rate, a move to the bank channel makes sense, added Rummage. Average wirehouse advisors have annual growth rates of 10% to 15%, whereas at a bank they can double and sometimes triple their growth, Rummage noted.  “I’ve seen guys go from doing $450,000 to $750,000 in the first year,” he said of wirehouse advisors who moved to banks.

In contrast to banks, wirehouses provide no support in helping advisors come up with leads, making them a tough environment in which to build and grow a book a business. “They just don’t do anything to help an advisor grow. They do not provide referrals or warm leads,” said Rummage.

Wirehouses have also made it more difficult for advisors serving the lower-tier of the mass-affluent. For example, they have become more stringent about the types of households financial consultants get paid on.  At Merrill Lynch advisors cannot get paid on households with less than $100,000 at the firm and many are not able to receive payment on households with between $100,000 and $250,000, said Schmitt of Aite Group.  

“If you’re good at getting clients with $100,000 to $200,000, I think the bank channel is probably the best one for you,” she said.

Upfront Money?

Not surprisingly, getting wirehouse advisors isn’t cheap, particularly if the bank is targeting strong producers. The only banks that are successful in recruiting wirehouse individuals doing more than $300,000 in production give upfront money ranging from 25% to 100% of their trailing-12 production, said Rummage and other recruiters.

In their bid for wirehouse advisors, banks of all sizes are loosening their purse strings. In a survey of the most progressive recruiting packages in the bank channel, consulting firm Kehrer Saltzman & Associates found that more than half of the 11 plans were from modest-size bank broker-dealers with 100 to 500 advisors and some with less than 100. One of the plans targeting advisors producing between $300,000 and $400,000 offered a base salary of $88,000 for the first year and a guaranteed 42% payout, substantially above the typical $40,000 base and 40% payout now offered advisors as a recruiting incentive.

Advisors are usually looking for transition assistance to keep them whole as they learn their way around the financial institution, said Smith. “While we, in co-investment with the financial institution, maybe paying a little on the front end, it’s not the upfront check … It’s really making them whole during the transition period,” he said.

Borders of Capital Bank had to do just that in luring the $400,000 producer from Morgan Stanley. He offered the advisor “some upfront money, not a lot” in the range of $30,000 to $40,000, or roughly 10% of his trailing 12. No upfront money was needed to bring the other two less experienced advisors onboard.

For the biggest producers, more than a little upfront money is needed to land them. First Dakota’s Ness declined to say how much the bank offered the advisory duo to get them to make the move from UBS.

“Obviously we need to compensate them fairly and make sure that they’re making just as much as they were before,” Ness said.

Read More:
Recruiting Sweeteners Not Sweet Enough


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