Wirehouse Movement Slows in October

Brokers are switching firms at a slower pace, and the largest number still go to another wirehouse firm rather than a new advisory channel, according to the Discovery Database.

In October, 1,448 advisers moved firms, and 361 (25%) of them were in the wirehouse channel, down from 380 in September, according to the research firm, which tracks financial adviser movement month to month.

As data has previously shown, despite the hype that many wirehouse advisers are going independent, the largest number still go to another wirehouse when switching firms (see “Once a Wirehouse Adviser, Always a Wirehouse Adviser?”). Of the 25,109 reps that changed firms from October 2008 to September 2009, 40% were wirehouse reps, and more than half (53%) of wirehouse reps stayed within the wirehouse channel, according to Discovery.

Of the wirehouse reps who switched firms in October, 34% chose to go to another wirehouse— more than other channel. Other options brokers chose were: changing to an institutional focus (20%), going independent (18%), joining a bank (14%), and going to a regional firm (11%), according to the data.

Looking Back

The year started out with a lot of movement in the advisory sphere. On average, 2,140 advisers in all channels moved per month over the last year (from October 2008 to September 2009), according to Discovery. In the first quarter of 2009, there was a 17.6% increase in adviser movement from the last quarter of 2008.

However, there was a 24% decrease in adviser movement from the first quarter to the second quarter of 2009, and adviser movement remained about the same from the second to third quarter of 2009, according to the research firm.

House Panel Passes Investor Protection Act

A U.S. House committee on Wednesday approved the Investor Protection Act, which would expand the power of the Securities and Exchange Commission (SEC).

A news release from the House Financial Services Committee said the vote on H.R. 3817, sponsored by Representative Paul E. Kanjorski (D-Pennsylvania), was 41 to 28. Kanjorski is chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

Among the bill’s provisions is what the news release called a “harmonized standard” for fiduciary responsibilities of broker/dealers and investment advisers. The bill also doubles the SEC’s funding over five years and provides new enforcement power and regulatory authority.

The measure fixes what backers say are holes in the Securities Investor Protection Act, which returns money to customers of insolvent fraudulent broker/dealers, and the Public Company Accounting Oversight Board (PCAOB). The PCAOB has lacked the powers it needed to examine the auditors of broker-dealers, according to the announcement.

“In order to maintain a sound economy, we must improve investor protection and confidence,” said Kanjorski. “The Investor Protection Act aims to achieve these goals while also improving enforcement powers at the U.S. Securities and Exchange Commission and implementing a fiduciary standard for broker-dealers and investment advisers to ensure that customers’ interests are at the forefront of investment recommendations.”

The bill also provides a “bounty program” to create incentives for whistleblowers to identify wrongdoing in the securities markets and ends mandatory arbitration requirements for defrauded investors seeking redress.

«