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Blogs - The Smart Advisor
The Loyalty Question: How Can Big Brokerage Firms Keep Advisors in Their Seats?
On Wall Street
Thursday, September 6, 2012

Loyalty. It's a hot topic when you're talking about investor-clients and their loyalty to their financial advisors. But it's also a real issue for the large, elite brokerage firms who are fighting to keep their advisors in their current seats.

Arthur Levitt, the former chairman of the Securities and Exchange Commission (and former chairman of the American Stock Exchange), was on Bloomberg radio this morning discussing the dispute over the valuation of the merged Morgan Stanley Smith Barney and how it may be adversely affecting the firm's advisor force. The big brokerage houses have a huge problem, he says. The clients are loyal to the advisor and not really to the firm.

The companies haven't been able to build that loyalty more directly between themselves and those investor-clients, Levitt said in the radio interview. And that puts the advisors in the driver seat. If they walk out the door so do those client assets. He predicts that more brokers -- if not kept happy, if needs aren't met - will head to regional rivals or start their own small investment firms.  

The Big Four - Morgan Stanley Smith Barney, Bank of America Merrill Lynch, UBS and Wells Fargo -- have been watching their advisors play musical chairs among their quartet in the last several years. But, they've also been watching some of their talent head to regional firms such as Stifel Nicolaus, RBC Wealth or Raymond James.

True, some advisors have started their own registered investment advisory firms but wealth management industry analysts aren't sure if wirehouse advisors are really making an exodus into the RIA space. It's the regionals that seem to have the appeal right now.

But as Arthur Levitt says, it's a matter of loyalty and the firms have their work cut out for them if they want to retain their advisors and their clients and the assets that come with them. 

(3) Comments
Loyalty is earned. It is partially earned when the firm assist the advisor in growing the advisor's business. Many advisors i talk to tell me they distant themselves from their firms because their firms hurt their ability to grow. In those cases it will be futile
Posted by John S | Thursday, September 06 2012 at 12:30PM ET
A poor article. By asking the question in the headline you imply your article might offer a potential solution. The article did nothing but state there is a problem.
Posted by Doug B | Thursday, September 06 2012 at 3:17PM ET
Cross selling is one of the biggest issues I am hearing from Financial Advisors- one FC at a bank owned wire house told me his clients were being solicited by their firm when they logged out of their client portal with a statement something like this " would you like to find out about FREE on trading" thus the FC is really competing with his firm.
Posted by William G | Saturday, September 22 2012 at 7:26PM ET
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