March 15, 2023
Jason Diamond & Transition Report Featured
By Holt Hackney
Founded in 1998 by Mindy Diamond, Diamond Consultants (DC) has always prided itself on giving good, measured advice to financial advisors and firms about their interactions with recruiters or potential suitors. One lynchpin of its successful track record is interpreting the data that can forecast trends within the industry. For the first two decades since its founding, DC’s interpretation of that data has been anecdotal. That all changed after the pandemic when the company began leveraging its prodigious network to scientifically gather the data, and then make sense of what it means for the future.
What emerged from that labor was an annual report for advisors, which was initially launched in 2022. Soon, DC will introduce its second annual report, which explores what became a very tumultuous second half of 2022. The report, obviously, is highly anticipated by the RIA community. “The report basically covers transitions and advisor movement, while providing insights from our firm,” said Jason Diamond, Vice President at DC. “Overall, we saw an average of 750 advisors per month make a move in 2022. But where were they coming from? Where are they going to? And what does the data tell us?”
Diamond added that “besides the raw data, like how many advisors moved where and when, we tried to convey what the movement tells us about the past year. And even more importantly, where is the puck heading. Also, the data helps us determine who are the winners? And who are the losers? What firms have done a great job at positioning themselves for success? And what firms are struggling? Our experience from producing the first report is that people find those insights really, really interesting, which is why we were so excited about producing this one.”
The trends that are shared in the report are relevant well into this year and beyond, according to Diamond. “It’s no surprise that advisors care quite a bit about where their peers are going,” he said. “But more than the ‘where’ is sort of the ‘why.’ Why are they moving? How are they moving? What are they being paid to move? The report was our attempt to answer all of that.” Before getting into the “high-level takeaways” Diamond noted that the report focuses on “experienced advisor movement. So, when we do the data analysis, we removed any advisor who had a length of service of less than three years.”
Among the Takeaways
- There were 9,006 advisors who made a move in 2022, or about 750 moves per month. That monthly rate represented an increase from the data collected the previous year. “It is to be determined if we will see a lag as a result of market conditions,” said Diamond. “But thus far, it has been steady to slightly positive momentum in recruiting.”
- The moves being made by advisors are bifurcated. “All the various channels – boutiques, independents, regionals, wire houses, etc. – saw wins and losses,” said Diamond. “What that tells us is that the industry landscape is working, right? It’s evolved to meet the needs of advisors. There is probably an option out there that allows you to replicate the best of what you have at your current firm; but in a wrapper with more freedom and control, which will feel better to you, or better enough to you, than what you have at your current firm.”
- That said, “while there were plenty of advisors who moved between channels, the highest number of moves were intra-channel, i.e., wire to wire,” said Diamond. “This is particularly true in the independent space, which suggests that once an advisor moves away from a captive model, they are unlikely to go back. Advisors do, however, change ‘flavors’ of independence, i.e., moving from one independent broker-dealer to another, or moving from an independent broker-dealer to the RIA space.
- Advisors moved with and without protocol protection. “It seems that protocol was not a deterrent,” said Diamond.
- Advisors clearly thought about the business as a business. Elaborating, Diamond noted that “they looked big picture/long term to ensure that where they are allows them to maximize the enterprise value for the business they’ve built.
- Many firms upped their baseline deals. “It’s fair to expect deals in the independent space around 40% of an advisor’s GDC (and in some cases higher), and in the traditional firm world, baseline deals are now north of 300% of T12.”
Drilling down on some of the firms mentioned in the report, Diamond said that UBS’ promotional deals to recruit advisors “clearly worked. The numbers back this up. UBS saw 46 advisors join in the first half versus 81 in the second half of the year. Maybe that was no surprise because they wouldn’t offer them if they didn’t work. Right? But still, it is notable. We also saw some firms that were willing to even do things like repay outstanding note balances or reimburse for deferred comp. Basically, they were exploring and embracing new ways to get advisors to be free agents sooner. We saw some firms that would even structure recruiting deals as guaranteed amounts or salaries, which is a little different than the traditional structure.”
In the context of winners and losers, Diamond also said that Morgan Stanley “was the clear winner in the wirehouse space. They added 445 advisors but only lost 256, so that’s a net of 189. Counter that with a firm like Merrill, which actually had quite a bit of success bringing advisors in – it brought in 441. But it lost 595 advisors. So that’s a negative 154 net. Another interesting example was Edward Jones. That has been a hot story because of the large moves out of the firm. Our data certainly supports that. Edward Jones added 191 advisors, but lost 371 for a negative net of 180. And on the independent side it’s the usual suspects continuing to add recruits, such as Raymond James and Commonwealth.”
“The trends that are shared in the report are relevant well into this year and beyond.”
While the report is obviously fascinating reading for anyone in the industry, it is also highly beneficial to DC because “it reveals a lot of trends, which we now have the data to support. For example, we felt that the landscape is bifurcated, with advisors not only going to the wirehouses, but also the regionals as well as the independent firms and the boutique firms. But it was really fascinating to see the data support what we thought we already knew. There were certainly some surprises, as far as where people were going and who the winners and losers were. But for the most part, it helped us to put numbers to a lot of the trends that we talk about day in and day out. It’s also powerful for us to take a step back, as it kind of forces us to put together our thoughts for what we predict will happen in 2023. Forcing ourselves to go through this exercise in a way that we think will be digestible for all advisors makes me a smarter recruiter and a smarter industry participant.”
Diamond Consultants is in this for the long haul, according to Diamond, who notes that there’s “nothing similar in the industry” to this report. “It is comprehensive and data-driven. And more importantly, it’s a really good layering of the raw data analysis, especially paired with our interpretations and analysis of the data. It tells an important story that is relevant to everyone.”
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