In the past two years, Barclays and RW Baird have made quite a splash on the recruiting scene. Both have snagged an impressive group of top advisors from wirehouse competitors.
Barclays, the British-based financial services firm, recently hired 14 advisors whose assets under management totaled $4.5 billion. The firm has about 250 U.S.-based advisors who focus on clients with $10 million-plus retail accounts. It expects to hire between 50 and 100 advisors per year.
Barclays has done a phenomenal job rebranding and upgrading the capabilities of the old Lehman.
Baird is a Milwaukee-based regional firm with 660 advisors.
It's hired around 50 advisors and branch management personnel this year. These were also members of a high-end group that their former firms would now include in their "regretted attrition" stats.
Baird has hired more than 100 advisors since 2009 and has opened several branches in different parts of the country.
Why have two so different firms emerged as powerhouse recruiters?
First, the 2008 market wipeout caused (to put it mildly) much damage to the reputations of the major wirehouse firms. As a result, many advisors now view well-capitalized firms with untarnished names as attractive places to be.
Today, advisors at Baird and Barclays are able to leverage off their new firms unsullied brand to both bring over new clients and win new ones. They can inspire confidence by pointing to their new firm's savvy avoidance of the colossal blunders of the TARP era.
Regional-firm advisors can boast that their firms are not even involved in the problematic busineses that racked up such devastating losses.
Increased access to platform resources is another driver. Three out of four wirehouse brokers are now at larger, newly merged organizations.
While wirehouse advisors generally respect the breadth of their firm's platform, wirehouses can be plagued by low morale.
In 2008, the fifth king of Bhutan introduced a "Gross National Happiness Index" designed to measure the contentment level of a society's people. In our view, if this metric was ever rolled out on Wall Street, the smaller boutique and regional firms would occupy the high ground.
Turnover at these firms is dramatically less than that of their wirehouse counterparts. Advisors feel more connected to firms that facilitate an ease of interaction with home-office product specialists and senior management.
What's the downside of joining these types of firms?
First, one obvious one: If your main goal is to top tick the upfront deal market, boutique and regional firms are not for you. They offer deals that are somewhat less than that of wirehouses.
To properly select a firm, you need to consider the type of business that you now have and where you'd like to take it.
For example, Barclays is a worthy choice for those advisors who would like to cultivate a true high net worth business with $5 million-plus accounts.
Syndicate and possible corporate assignments are attractive features here, too. But if you require a platform that includes mutual funds, insurance products and 401(k) capabilities, this is probably not the best place for you.
Fee-based platforms are being expanded, and the technology is being upgraded, so prospective advisors will need to do some serious tire kicking to ensure that all the capabilities that they need are there.
Baird is an employee-owned firm. These firms are usually prudent decision makers that are not likely to risk firm capital speculating with opaque financial instruments.
Plus, they are able to allocate their funds based on their view of the firm's long term interests, because they don't have to play the quarterly earnings game.
On the other hand, regional firms are rarely innovators. The latest wrinkles in fee-based business are developed at the wirehouses which have access to larger pools of capital.
Regionals learn from the mistakes of others and adopt these newer features later on. If your business requires cutting-edge banking services such as HNW loans pegged to LIBOR or access to internal derivative trading desks, this is not the place for you.