Newsletter Signup

Search Our Blog

Wells Fargo, Ameriprise and Other Independent Firms Up Recruiting Ante

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Tuesday, February 12, 2019.

Large up-front, forgivable promissory notes were once the gold standard in financial advisor recruiting.  From the early 2000’s through 2017, they were extremely common and used as a way to entice high producing brokers to join (or remain at) the firm recruiting the talent.  Virtually all firms—including Morgan Stanley, Merrill Lynch, UBS and Wells Fargo—used these notes as their primary recruiting tool, and almost all were structured the same way--providing for a large, often multi-million dollar “bonus” tied to a promissory note and forgiven over time.  Deals totaling 300-350%+ of an advisor’s trailing-12 production were not uncommon. The money was flowing, and many advisors were eager to jump from one firm to another chasing a big payout. 

But that all came to a grinding halt in mid-2017, due in part to anticipated regulatory scrutiny of these deals in light of the Department of Labor’s proposed fiduciary rule.  At the same time, firms realized they were carrying billions of dollars of what often turned out to be “bad debt” on their books, as advisors often disputed their obligation to repay the notes when things didn’t work out at the recruiting firm.  With the exception of Wells Fargo, which continues to offer large transition bonuses to lure advisors into the firm (likely due to the severe reputational damage and attrition the firm has sustained), none of the major wirehouses are offering large recruitment deals.  Instead, they are focusing on retaining their existing advisor force, whether through carrots like higher payouts and other perks, or sticks, such as the decision to withdraw from the broker protocol and changes to advisor trade secret and non-compete/non-solicit agreements.

Just as one act closed, entering stage left were the independent broker-dealers, who had seen extraordinary growth over the past decade and now had an opportunity to continue that growth by taking a play out of the wirehouse book.  Wells Fargo Advisors, Ameriprise, LPL Financial, Raymond James, Cetera and others are now offering unprecedented signing “bonuses,” transition assistance packages and other financial motivators to lure advisors out of the wirehouses or other competing independent firms.  We have yet to return to the heyday of bonuses, but deals approaching 100% of an advisors trailing-12 are not uncommon.  We saw how the play ended for the wirehouses.  It remains to be seen whether the independents will succeed in this new-to-them strategy. 

Shustak Reynolds & Partners, P.C.’s San Diego securities and FINRA lawyers, Irvine FINRA lawyers, Los Angeles FINRA lawyers, San Francisco FINRA lawyers and New York FINRA lawyers represent registered representatives, financial advisors, investment advisors, financial institutions and others in a wide variety of securities-related disputes, including broker protocol disputes and non-compete, restrictive covenant and trade secret litigation.  The firm’s financial services attorneys, FINRA attorneys and broker protocol lawyers have extensive experience handling intra-industry employment, recruitment and broker transition disputes, including golden handcuff and forgivable promissory note disputes.  The firm’s FINRA attorneys are uniquely experienced in handling FINRA employment disputes involving promissory notes, allegations of misappropriation of trade secrets or broker protocol violations.  Partner George C. Miller is based in the firm’s San Diego offices and can be reached at 619.696.9500. 

Shustak Reynolds & Partners, P.C.’s San Diego securities and FINRA lawyers, Irvine FINRA lawyers, Los Angeles FINRA lawyers, San Francisco FINRA lawyers and New York FINRA lawyers represent registered representatives, financial advisors, investment advisors, financial institutions and others in a wide variety of securities-related disputes, including broker protocol disputes and non-compete, restrictive covenant and trade secret litigation.  The firm’s financial services attorneys, FINRA attorneys and broker protocol lawyers have extensive experience handling intra-industry employment, recruitment and broker transition disputes, including golden handcuff and forgivable promissory note disputes.  The firm’s FINRA attorneys are uniquely experienced in handling FINRA employment disputes involving promissory notes, allegations of misappropriation of trade secrets or broker protocol violations.  Partner George C. Miller is based in the firm’s San Diego offices and can be reached at 619.696.9500. 

Share This Article linkedin