Although it has taken a couple years, regional broker/dealers made a comeback in 2018. After analyzing over 200 of the year’s largest advisor moves, regional B/Ds received nearly half of the teams in transition and managed over $47 billion. Stifel and Raymond James led all firms with each adding 30 new teams, 20 of which came from wirehouses. This is not surprising as the proposed fiduciary rule caused the wires to curb recruiting in 2016, which was further complicated in 2017 when Morgan Stanley and UBS withdrew from the broker protocol agreement. During this time, regionals pitched recruiting efforts on their upgraded technology, improved back office support, better packaged products, less guardrails, and tailored solutions for the high-net-worth market. In response, wirehouses have recently taken diverse approaches with Wells Fargo launching an RIA and Merrill Lynch aiming to become a one-stop shop by further integration with Bank of America.
Meanwhile regionals have already built a competitive platform. By enhancing banking capabilities, trust services, and customizable investment solutions, they have morphed into a prime landing spot for wirehouse teams managing $250 - $500 million. Since teams of this size typically do not grab the attention of an RIA aggregator like HighTower or have the scale to seamlessly transition toward independence, tucking into an existing practice or joining a regional becomes a more feasible option. For teams that do not find an M&A deal, regional B/Ds fill the void by offering a platform comparable to a wirehouse and providing transition teams that can support the change. Technology and compliance are critical issues for teams seeking independence, so a regional’s added resources can ease an advisor’s mind and make them comfortable enough to make the change.
Other contributors include wirehouse focus on mega teams, which may prompt teams with less than $1 billion to feel like they are receiving less attention, and then grow frustrated with the changing rules and find competitive compensation elsewhere. Also, due to its fraudulent activity, Wells Fargo was hit the hardest in 2018. Stifel and Raymond James alone gathered nearly $13 billion from Wells Fargo and transitioned teams to their regional and independent units. Asset managers must be aware of the changing landscape, especially as consolidation and advisor movement remain at high levels.
Assets Transitioned to Top Regionals in 2018 ($ Millions)
Source: FUSE Research