Why recruitment cuts may not be a wise move for financial firms

But why are firms are pouring resources into their existing advisors?

Why recruitment cuts may not be a wise move for financial firms
Big wirehouses like UBS, Morgan Stanley, and Merrill Lunch, have laid out their plans to slash recruitment for experienced advisors over the past year, believing that it would be practical to divert resources to their current pool of advisors.

However, the move may turn out to be detrimental for existing advisors. Diamond Consultants CEO Mindy Diamond said in a commentary on WealthManagement.com that these planned recruitment cuts seem like a way for these firms to tie their advisors down and strip them of their freedom.

For starters, Diamond claimed that the less competition for advisors puts more power to firms. This makes advisors feel stuck with their current positions.

"It seems to us that recruiting keeps the firms honest. They have to work hard to lure top talent away from their competitors and continue to invest in their wealth management units to remain relevant and at the top of the food chain," she said.

More so, this raises the question whether firms may eventually abandon the protocol for recruiting as they might feel that they have more to lose by attrition and less to gain by recruiting.

This could also lead to fewer incentive programs for retiring advisors.

Diamond stated, "If the price of recruiting has come way down and there is less competition for most of the advisor population, then what reason do the big firms have to keep the advisor-friendly sunset programs at high-water marks?"

Teams which are looking to grow may also be stuck in the doldrums in terms of recruiting younger but established advisors as these prospects may not qualify under the firm's selective recruiting criteria.

In the end, she suggested that those advisors mulling over their options should base their decisions on their knowledge of the industry landscape and not fear and mere hope.


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