Product Restrictions, Platform Limitations, Drive Adviser Attrition

The May 2017 issue of The Cerulli Edge – U.S. Edition, offers advisers a checklist of common hurdles that commonly lead to staff discontent and attrition, finding there are many ways firms could do more to ensure their advisers stay committed.

According to the analysis, “adviser teaming, affiliation flexibility, culture, technology, operations and compliance, and the proposed Department of Labor conflict of interest rules are all emerging factors impacting recruitment and retention for broker/dealers and registered investment adviser (RIA) custodians.”

It might seem like a fairly simple and innocuous list on first blush—but retirement industry practitioners will know that each of these items represents its own microcosm of challenges and opportunities. If an adviser or team of advisers has a problem with the way the firm is approaching any of these areas, it can quickly disrupt even the most well-established relationships. 

“Pain points are often at the root of an adviser’s decision to change firms,” says Kenton Shirk, director at Cerulli. “The choice may be triggered by factors such as restrictions on product use, client fees imposed for small accounts, changing compensation, unreliable technology, or minimum account size mandates.”

Shirk says these factors “will shape the growth—or decline—of channels and underlying firms in the marketplace.” Again it is important to stress the impact will not just be client-facing; the evolution of the advisory industry is also changing the internal organization and behavior of advisory firms and their service provider partners.  

“Because recruiting a large multi-adviser team is more complex and time-consuming, large broker/dealers are promoting teaming as a retention strategy and adjusting compensation to favor teams,” Shirk observes. “Cerulli finds that numerous independent broker/dealers have introduced their own RIA platforms in response to the attrition of large advisers to the RIA channel. Having their own platforms allows advisers to leverage them while an adviser holds a separate and independent RIA.”

NEXT: Independent B/Ds and IRAs work in concert 

The Cerulli Associates analysis presents evidence that multi-channel broker/dealers are positioning their RIA platforms “as a new way to attract advisers and serve them throughout their lifecycle regardless of regulatory structure.”

Another clear trend is that “culture is becoming a critical differentiator.” Advisory firm leaders may assume it is compensation or some other monetary-based factor that most sets firms apart, but from the perspective of advisers on the ground it is often more esoteric considerations that really determine happiness. 

“Of advisers in employee channels who switched firms in the past three years, 51% indicate that the quality of their broker/dealer’s culture was a major factor influencing their decision,” Shirk warns. “Similarly, technology is becoming an increasingly important factor when advisers choose a new firm. Advisers are beginning to recognize its large impact on productivity and client experience.”

Cerulli finds that among wirehouse advisers who would prefer joining the independent model if they leave their current firm, nearly half indicate that assuming additional compliance (48%) and operational (47%) responsibilities are major concerns.

“RIA aggregators and platforms use concerns about operations and compliance to win breakaway advisers in wirehouses who want to go independent but desire a turnkey infrastructure,” the Cerulli research concludes.

Information on obtaining Cerulli Associates research is available here.