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Why have the Big 4 wire-houses scaled back their financial advisor training programs? One theory is cost. Another theory is lack of success. Both are likely true. Maybe it’s because the Big 4 CEOs prefer the European model of salary and bonus. Essentially, that model is more profitable, and financial advisors are less portable. As stewards of the business, CEOs know that’s in the best interest of shareholders long-term. Sadly, it doesn’t bode well for the next generation of financial advisors who possess the entrepreneurial talent to build their own books of business.
What a wonderful opportunity for regionals, boutiques and independent firms to build market share. Unlike the Big 4, they have no interest in the European model of salary and bonus. To be fair, however, they too provide little, if any, training for the next generation of financial advisors.
Who then will fill this critical vacuum? For the foreseeable future, asset managers will likely capitalize on this opportunity, but that comes with inherent conflicts of interest. Industry conferences are another option, but they often favor top advisors as opposed to trainees. Sadly, the default option will be online training which is akin to learning the business over YouTube.
In the end, the Big 4 will revert to long-term recruiting deals (10+ years) that accomplish two goals. One, it allows them to maintain market share vis-a-vis their competitors. Two, it buys them time to win the “War of Attrition.”
Moreover, they’re buying retiring financial advisors books (CTP, FAP, ALFA) at a 50% discount to FMV. Even smarter, they contractually preclude the inheriting financial advisor from leaving the firm for up to a decade. They sell proprietary products such as checking accounts that make it inconvenient for clients to leave. For example, Bank of America just announced in the 3rd quarter that 50% of all Merrill clients now have a BAC checking account. The long game is smart. Importantly, the odds are in favor of the house.
Never underestimate the intelligence of senior management at the Big 4. They have been growing assets, revenue, and profitability year after year. There’s a reason they abandoned their training programs. They know what they're doing. They are always one step ahead. Are you?
Nov 15, 2023
Is Financial Advisor Training Terminally Ill?
What a wonderful opportunity for regionals, boutiques and independent firms to build market share. Unlike the Big 4, they have no interest in the European model of salary and bonus. To be fair, however, they too provide little, if any, training for the next generation of financial advisors.
Who then will fill this critical vacuum? For the foreseeable future, asset managers will likely capitalize on this opportunity, but that comes with inherent conflicts of interest. Industry conferences are another option, but they often favor top advisors as opposed to trainees. Sadly, the default option will be online training which is akin to learning the business over YouTube.
In the end, the Big 4 will revert to long-term recruiting deals (10+ years) that accomplish two goals. One, it allows them to maintain market share vis-a-vis their competitors. Two, it buys them time to win the “War of Attrition.”
Moreover, they’re buying retiring financial advisors books (CTP, FAP, ALFA) at a 50% discount to FMV. Even smarter, they contractually preclude the inheriting financial advisor from leaving the firm for up to a decade. They sell proprietary products such as checking accounts that make it inconvenient for clients to leave. For example, Bank of America just announced in the 3rd quarter that 50% of all Merrill clients now have a BAC checking account. The long game is smart. Importantly, the odds are in favor of the house.
Never underestimate the intelligence of senior management at the Big 4. They have been growing assets, revenue, and profitability year after year. There’s a reason they abandoned their training programs. They know what they're doing. They are always one step ahead. Are you?
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