If it's nice to be wanted, licensed investment advisors must be feeling pretty good these days.

More than any other time in recent memory, both bank investment programs and wirehouses are scrambling to attract talented, experienced advisors, giving reps with quality track records plenty of leverage to bargain for compensation. "I have been involved in recruiting for 25 years, and this is close to the tightest I have ever seen it-certainly the tightest since the tech bubble burst in 2001," says Paul Werlin, president of Human Capital Resources in St. Petersburg, Fla.

The market has become so tight, in fact, that banks are not just poaching brokers from wirehouses, but vice versa. "There has been more interest from wirehouses in bank broker talent," says Michael Mortensen, president and CEO of PNC Investments. "The pool is getting smaller, so people are casting a wider net than in the past." Over the years, PNC has had what Mortensen calls a "stable program" with good retention. "But we have seen more brokers leave than we ever have in the past with the aggressive recruiting that's going on."

Experts cite various reasons for the competition over experienced advisors, but it all boils down to supply and demand. Several factors are fueling a shortage of licensed brokers. For one, the mass of baby boomers is moving into retirement and looking for people to help them manage their retirement savings. And according to Werlin's research, most reps don't want to switch banks and disrupt their client base. That some 90% of advisors said they had no plans to change firms only exacerbates the demand since there are fewer advisors seeking jobs. Meanwhile, there's a dearth of well-trained young advisors, a hangover from the tech wreck, when most wirehouses reduced their training budgets.

Since wirehouses have traditionally been the training ground for investment advisors in both the bank and brokerage channels, this means that brokers with five to six years of experience-those who are old enough to have proven themselves, yet young enough to have 30 years of productivity left-are in short supply.

No Longer Enough

For the first few years, banks didn't feel the pinch of a shrinking talent pool because there was a temporary expansion in the number of quality investment advisors on the market when stocks declined after Sept. 11, says Danny Sarch, president of search firm Leitner Sarch in White Plains, N.Y. "Post-Sept. 11, banks were picking up a lot of brokers who were good, but had been beaten up by the marketplace." In that environment, the promise of a steady stream of sales leads from a bank's customer database was enough to entice some brokers away from Wall Street firms that were still shaken by the bear market. But those days are gone. "It's not enough anymore to say, 'We're going to give you leads,' " says Sarch. "Now banks are competing in a pool where everyone has had a few good years."

On the demand side, experts say that banks want to beef up their brokerage programs at the same time that a rash of new investment firms is looking to hire advisors. "I can name 50 players that didn't even exist before Sept. 11," says Werlin.

Competition is especially intense for high producers as top-end bank programs try to compete with the wirehouses for high-net-worth clients. "As bank investment programs have been more successful and their programs have evolved, their requirements have risen," says Rich Schwarzkopf of Schwarzkopf Recruiting Service in New York. "Just three years ago, Bank of America or Wachovia would look at candidates with a trailing 12-month production of $200,000, more or less. But now, depending on the branches and the city, it's $250,000 to $300,000, at a minimum."

Sarch says this means brokers who would have been considered out of the league of most bank investment programs a few years ago, are now being wooed by both banks and wirehouses, and bank compensation costs are rising accordingly. "The catch is that banks have to give a comparable recruiting bonus," he says.

At a wirehouse looking to recruit an established broker, the standard bonus is now 100% of trailing 12-month production. So a broker who generated $400,000 in revenue in the past year would receive $400,000 in cash up front, usually in the form of a forgivable loan. Typically, the loan would be forgiven in yearly increments of $100,000 over the first four years of the new advisor's tenure.

Experts say that banks tend not to match their wirehouse rivals dollar for dollar. Bigger banks are more likely to offer about 40% of trailing 12-month production, relying instead on the promise of referrals and quality-of-life improvements to offset the difference. "The big bank programs are paying more than they used to, because they're better candidates, but also because recruiting is more competitive," says Schwarzkopf. "Bank compensation may not be up to a UBS or Morgan Stanley level, but banks have to compete with them."