A few weeks ago, rumors surfaced that Osaic was in talks to acquire rival Cetera Financial Group, in a deal that would create one of the largest independent broker\/dealers with more than 23,000 advisors. An Osaic spokesman has denied the rumors, and several third-party recruiters took to LinkedIn.com, saying the rumblings were false and originated with a Texas-based recruiter trying to create fear and confusion among advisors. \u00a0<\/p>\n
The rumor took on a life of its own, and those recruiters say the incident points to a larger issue within the IBD space. It\u2019s indicative of how fiercely competitive advisor recruiting has become, and how far some recruiters will go, using such fear-based sales tactics to spur advisor movement.\u00a0<\/p>\n
\u201cI don\u2019t recall the last time a rumor was distributed with such incredible efficacy,\u201d said Philip Waxelbaum, founder and principal at Masada Consulting,\u00a0an industry recruiting firm.\u00a0<\/p>\n
Related:Raymond James Lands $1B, Four-Advisor Team from Merrill<\/a><\/p>\n Waxelbaum wrote a LinkedIn post<\/a>, calling it a \u201clearning moment\u201d for advisors and urging caution when receiving such information.\u00a0<\/p>\n Several sources told Wealth Management that Cetera took legal action against the third-party recruiter who started the rumor. A Cetera spokeswoman declined to comment on legal matters.\u00a0<\/p>\n Waxelbaum said there are between 320,000 and 350,000 FINRA-registered, client-facing advisors operating across different channels, and about 3% to 5% of those change affiliation every year.\u00a0<\/p>\n \u201cSo you\u2019ve got this in effect a cottage industry of startup recruiters, and there\u2019s no supervision,\u201d he said. \u201cThey\u2019re running with scissors every single day.\u201d<\/p>\n The sale rumors show how much the recruiting environment has changed, he added. Ten to 15 years ago, firms had their recruiting budget for the year, and once the money was spent, they were done until the next budget was set.\u00a0<\/p>\n \u201cThe environment that you have right now is that every broker\/dealer is fighting tooth and nail to meet their recruiting goals and to continue inorganic growth endlessly,\u201d he added. \u201cRecruiting budgets, they\u2019re for good governance. Every firm has one, but they\u2019re incredibly elastic. When you catch a firm that\u2019s on a wild tear recruiting, there\u2019s a capital partner, or they reset capital even within their own organization to keep it up, because you never know when the sun\u2019s going to go down. So this kind of behavior, in many ways, is sponsored by the same entities that become victims to it.\u201d<\/p>\n And nowadays, recruiting has become a much higher priority for the broker\/dealers. Some of the recruiting organizations within these firms are quite significant and have direct or close access to the C-suite executives, Waxelbaum said.\u00a0<\/p>\n Related:LPL Retaining Larger, High-Quality Commonwealth Advisors<\/a><\/p>\n He also attributes this heated environment to a \u201cpervasive doom mentality,\u201d with recruiters afraid of a repeat of 2008, which would bring advisor movement to a halt.\u00a0<\/p>\n \u201cEvery recruiter operates like many salespeople do, that this is all just a fantasy, and if I don\u2019t make as much as I can in this moment, I may never earn a penny again,\u201d he said.<\/p>\n ‘Stupid Money’<\/p>\n Jeremy Belfiore, owner and CEO of Trust Visions Placement & Consulting, also posted on LinkedIn,<\/a> urging advisors not to panic and to do their due diligence when considering a third-party recruiting firm. In an interview with Wealth Management, Belfiore said there\u2019s greater competition among recruiting firms focused on a high volume of deals rather than quality.\u00a0<\/p>\n \u201cUnfortunately, a lot of recruiting firms and recruiters try to strike fear in an advisor\u2019s mind and get them to move as quickly as possible,\u201d he said. \u201cEverybody has goals to meet.\u201d<\/p>\n He said much of the frenzy has been driven by LPL Financial\u2019s acquisition of Commonwealth Financial Network, a firm with many high-quality, coveted advisors. Some of the large IBD competitors sweetened their recruiting deals<\/a> to capture Commonwealth advisors, and they\u2019re offering those same deals to advisors at other firms.\u00a0<\/p>\n