Mergers and banking turmoil drain U.S. investment advisors

Financial Advisors


The U.S. investment-advising industry has seen a surge in job-hunting, with teams switching companies or going independent in response to mergers and disruptions in the banking industry.

More than 26,000 advisors will change jobs in 2022, or 9.2% of the U.S. total, according to Ceruli Associates. Industry executives said they expect that number to increase this year.

Many leave bank-owned advisory groups to run specialty stores or start their own companies, taking home the books of their customers. Among the teams jumping on this year were those at Silicon Valley Bank and First Republic, which served wealthy clients before the bank run forced them to make acquisitions.

“There’s been an influx of executives leaving banks,” said Trey Prescott, business development director at Advisory Services Network, a platform for registered investment advisors. It’s been happening for years, but “it’s just starting to catch fire,” he added.

The move shakes up the rock-solid world of the investment advisory industry, which is licensed to offer advice and, in some cases, direct control over money. Seruli says there are more than 16,000 companies managing $31 trillion in retail assets and employs nearly 300,000 individual advisors.

Prescott helps advisers to large corporations launch independent businesses. Last year, he attended 185 conferences, and by the first quarter of 2023, he said, two-thirds of that number. [leaving for] It’s an independent space,” he said.

Financial advisory teams within large banks typically operate with some degree of autonomy and access to the bank’s lending capabilities and research.

But the bureaucracy that comes with being in a heavily regulated bank can be painful at times, they say. Financial advisors may also require additional scrutiny by compliance teams when certain words in emails to customers are flagged, as well as efforts and paychecks to encourage employees to refer the business to other parts of the bank. I am secretly dissatisfied with the system.

One in four managers at Wall Street’s largest banks are dissatisfied with their pay structure, compared with just 5% at independent banks, according to Serli’s report. Compensation was cited as the primary reason for nearly half of the advisors who left.

“They keep track of how many referrals you make,” said one adviser who works for a large bank. [to the investment bank]. Each week, you will receive an email with the number you made. In a pinch, if I had an extra ticket to the Yankee Suite, I’d give it to someone who made more referrals. “

Advisors also said the move was driven by a flurry of mergers and acquisitions among smaller advisory firms, with many boutiques turning to larger, more organized operations. Owners of small, independent businesses (mainly baby boomers) are increasingly selling when they reach retirement age. Low interest rates also made acquisitions more attractive, and small businesses tended to scale up.

“There was a time when 50 property management didn’t even exist. [mergers] We hit 250 last year and are on pace to do the same this year. . . Steve Levitt, founder of financial services investment bank Park Sutton Advisors, said:

M&A has rapidly built up the scale of the company. A 2022 Fidelity study found that companies with more than $5 billion in assets under management have grown their assets by an average of 30% annually over the past three years, with half of that increase coming from M&A.

“Five years ago, $15 billion [in assets under management] RIAs just didn’t exist,” said Lorenzo Esparza, chief executive of investment manager Manhattan West. He said many advisors are seeking to find new firms or go independent, working for large companies and banks with unregistered cultures due to mergers.

Technologies such as platforms that can provide an outsourced “back office” for financial advisors seeking independence are accelerating the pace of change. His multi-billion dollar RIA team, one of the largest under management, would have previously held him back from leaving the company, but the tide has reversed and independence has become more attractive as the team grows. I’m here.

A decade ago, “independence was something of a strange cult for small practitioners,” said Leo Kelly, chief executive of investment advisory firm Verdens. “Today, independent spaces are very sophisticated.”



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