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01:23 PM
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Breakaway Brokers Taking Client Assets With Them

Not surprisingly, financial advisers say they are leaving brokerage and captive firms out of discontent and two-thirds are taking huge hunks of business with them, an Aite survey finds.

Aite Group has surveyed financial advisers to understand which are becoming breakaway brokers and why, and the extent to which they have been able to take client assets with them, in a report released today, "Wealth Management Goes Independent: Few Clients Left Behind." Among the findings, three seem particularly interesting for Wall Street firms:

—Brokerage firms are letting mid-range performers slip through their fingers. Employee brokers producing $200,000 to $500,000 annually in revenue show a high interest in going independent and make up 55% of potential breakaway brokers. "Many wire house firms (e.g., Merrill Lynch) have extended generous retention contracts to brokers producing more than $500,000, but have not offered similar deals to employee brokers producing less than this amount," writes report author Alois Pirker. "It can therefore be expected that a significant share of upcoming breakaway cases will involve brokers producing between $200,000 and $500,000. While these producers might not have been worth a retention package at their current employer, many other brokerage and independent firms will be delighted to take these brokers and their clients on board."

—Breakaway brokers are taking a substantial amount of client assets with them. Among financial advisers that have gone independent, 38% have retained 75% or more of client assets; 36% have kept 25% to 74%; and only 25% have kept less than a quarter of those client assets.

—The most successful breakaway brokers are leaving out of discontent. When asked why they left a major firm to go independent, brokers that kept more than 75% of client assets said they were not happy with their previous employer (56%) and liked the option to choose best-of-breed, third party products (53%). A bit lower on the list was "more freedom to take business and advise decisions" (42%).

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