By Mindy Diamond and Louis Diamond

A look back – and forward – on the forces behind an evolving wealth management industry.

It goes without saying that 2022 will be recalled as one of the most interesting and contradictory years in history.

As we shared in this annual review and forecast a year ago, 2022 would become the year of “more” in which all constituents would have greater expectations than ever before. That is, clients wanted more from their advisors; advisors wanted more from their Firms; and the firms, too, wanted more from their advisors.

It was a wave of fulfilling each of these requests that bred a year of abundance. The growing desires amongst each group created a proliferation of choice – with an expansion of models, opportunities, and aggressive deals to match – that resulted in an active stream of movement.

It was activity that we documented in a report covering the first half of the year (if you haven’t obtained a copy, you can get it here). In fact, an average of 708 advisors with a length of service greater than three years moved each month through June 2022. And based on our own experience (as hard numbers are not yet available), that activity continued throughout the second half of the year, despite volatile market headwinds.

Where advisors went was more disparate than ever before—and instead of domination by a single major player, we saw several leaders in each category of the industry landscape.

For instance, while Rockefeller Capital Management and First Republic Private Wealth Management led the headlines by landing some of the industry’s most elite teams, the real news was actually in the wirehouse world. The diaspora toward independence continued, albeit at a slower pace than in previous years, shifting the tides of movement back toward the wirehouses. With recruiting particularly active at Morgan Stanley and UBS, advisors demonstrated that it’s still the right model for many of them. And Wells Fargo, with bad publicity from previous years finally in its rearview mirror, made a strong comeback.

The regionals, like Raymond James, RBC, and others, also captured a large share of advisors – moving their average producer level well over the sub-million-dollar range it once was – proving that culture and control make for attractive value propositions even amongst the industry’s top teams.

Independence remained appealing, even if at a slower pace than years past, with freedom, control, and the potential for long-term monetization as potent drivers. Record valuations and sophisticated buyers, like private equity firms with deep pockets and healthy appetites to acquire high-quality businesses, caused many employee teams to reconsider the big picture in ways they had not before. That is, placing greater focus on building a business with the end in mind, even if it meant eschewing a significant recruitment package.

But while “do-it-yourself” independence was once the most popular option in the space, supported independence dominated 2022—with firms like Sanctuary Wealth, NewEdge Advisors, LPL Strategic Wealth Services, and Dynasty Financial Partners leading the way for advisors who wanted their own independent businesses without the hassle of building from scratch. And this year, we saw more of these platform firms offer upfront capital or minority investments to de-risk the move and help compensate for lost deferred compensation—a tactic that paid off for both sides of the table.

All that said, it was the W-2 firms that led the field, capturing the majority of advisor movement (with wirehouses leading the pack)—the attractive recruiting deals certainly a powerful tool in their arsenal.

Speaking of recruiting deals, we’ve been saying they were at a high-water mark every year for almost a decade. And just when we thought deals couldn’t go any higher, we were proven wrong. Facing more competition from every angle, several firms stepped outside the norm in an effort to win the race for top talent, driving deals higher to once unimaginable levels. We saw a handful of firms – UBS and RBC, in particular – go beyond their peers with uber-aggressive offers attached to a drop-dead join date as they bid for the industry’s best talent and, so far, it’s a strategy that paid off handsomely. Even outside these short-lived offers, boutique firms like First Republic, Rockefeller, and Steward Partners recast their deal structures to remain destinations of choice for top teams.

With the tailwinds of increased interest rates and hence more profits from net interest margin, several independent broker dealers stepped up their recruitment packages and scope of services. This led to an increased blurring of the lines between the independent broker dealer model and supported independence. That is, to compete for top advisors, these broker dealers realized they must provide more white-glove support to help advisors establish their practices, as well as robust outsourcing services. The cherry on top was the expansion of affiliation models to include the ability to become an RIA, drop FINRA licenses, or gain more independence without the need to repaper.

At its core, the notion of abundance – the overall sense of “wanting more” in a world where value and choice dominate – permeated the industry, driving movement and change. Advisors were driven by an evolved ethos:

“I believe my book has great value, and if I don’t feel well-served where I am, there are many options available to me in this seller’s market.”

All that said, how will the activity of 2022 impact 2023 and beyond? Here’s what we foresee…

The 10 Emerging Trends for 2023

1. Big firms will push harder to “incent” senior advisors to opt in to retire-in-place programs by increasing the deals and more aggressively pushing them to sign-on earlier in their careers—but many won’t bite for fear of being locked-in to the firm and the potential negative impact on next gen inheritors.
2. The recruiting pendulum will shift further—with a continued swing away from DIY independence and toward supported versions and the traditional brokerage world. Advisors will continue to crave the opportunity to become business owners, with the support they’ve grown accustomed to—with supported independence making the leap much more tenable. As for the big firms, they’ll continue to work hard to show that they are not all the same, amping up technology, growth opportunities, and support—plus the bonus of a too-good-to-pass-up transition deal. UBS will continue to up its game with a strong guaranteed transition deal; this will have the effect of making advisors demand similar deals from other firms. And Merrill will make their way back to become a real competitor in the recruiting game.
3. The feeling of vulnerability at the big firms will rise for advisors—with increased hyper-vigilant compliance scrutiny. As big firms look to standardize practices and eliminate risk where possible, they’ll become more heavy-handed with compliance and oversight. This comes at the expense of advisor control, as well as an expected uptick of heightened supervision and terminations.
4. Private bankers and advisors from other non-traditional firms will be a hot commodity in the talent pool—satisfying the industry’s hunger for sophisticated talent. 2022 was a boom year for private bankers, with many firms retraining their sites on this community after ignoring them for many years. We expect this trend to continue as more firms expand their addressable market and realize that bankers are attractive hires, bringing along well-run teams and ultra-high net worth clients who are major consumers of bank products.
5. Inspired by the knock-down success of the Multi-Family Office model (like Rockefeller), more well-capitalized high-end RIA firms will make a play for advisors with creative deal structures that are competitive to those found in the traditional space. It’s a trend driven by private equity firms that have their sights set on investing in quality RIAs—providing the financial firepower to attract breakaways who would prefer to join an established team-based model over starting their own practice.
6. The breakaway movement from RIAs will continue to accelerate and hit an all-time high. Non-owner employee advisors at the firms, who are also looking to take advantage of this abundance concept, will set out for greener pastures. Driven by industry consolidation, it will create a whole generation of advisors feeling more captive than ever and with a deep desire to reap the same financial rewards that their firms’ owners realized.
7. The “affiliation slide” will grow in popularity as firms with multiple affiliation models – like Wells Fargo, Ameriprise, LPL Financial, Raymond James, and Stifel – will continue to provide more pathways for those looking to change models while remaining on the firm’s platform. This ability to “slide” from one channel to another will prove valuable in staving off attrition while making transitions easier for advisors and their clients.
8. Independent broker dealers and supported independent platform firms will become the new built-in “buyers”—in response to advisors’ desire for M&A and succession planning options. The heightened popularity of minority non-controlling investors provides an opportunity for these firms to create liquidity and solve for succession. Given the benefit to both advisors and firms, we expect to see more in-house solutions like this arise.
9. The days of the “Big Bad Bank” will fade—and bank-owned firms like Merrill, Wells Fargo, and First Republic will increase in appeal amongst a particular faction of advisors drawn to the one-stop-shop capabilities, compelling brands, and growth opportunities. While in some cases, advisors will still confront greater bureaucracy, they will see it as a worthwhile trade-off.
10. Despite a slower than anticipated rollout, Goldman will find their stride and give custodians like Schwab, Fidelity, and Pershing a real run for their money—particularly amongst high net worth-focused advisors. Those waiting for the next “big thing” will see this as an opportunity to have the Goldman imprimatur backing their independent business.

No doubt we’ve written much about how advisor mindset has changed over the years—shifting from placing value on upfront transition money to obtaining more freedom and control. While all that’s still true, we’re seeing even further shifts to a greater focus on the long-term and maximizing their value.

That said, advisors are also widening their view to ensure that they look more introspectively at their career enterprise value—regardless of whether they are independent business owners, employees at one of the big brokerage firms, or somewhere in between. This will be the year that advisors take a step back and conceptualize not just how to maximize the value of their business and annual compensation, but how that translates into achieving their best business lives.

And in a world where abundance rules, advisors will continue to have every opportunity to take greater control of their businesses and lives—and achieve everything they set out for.

That is, every advisor will have the opportunity to maximize their career enterprise value.

As seen on WealthManagement.com…