It's time for the ol' crystal ball again, when yours truly makes some observations about the retail brokerage industry and fearless (some say worthless) predictions about where it's going.

In 24 years in this business—just had my anniversary, send cards to the address at the bottom—I've never seen a time where all the major firms had an element of stink about them. That's right, stink—as in, "bad smell here, stay away."

Most major firms lost billions in the subprime debacle. Executives who were seduced by easy profits from easy lending rode that train well past the last stop. And waiting in the train yard at the end of the line was a whole bunch of red ink. Retail brokers and shareholders (and, of course, retail brokers are shareholders) had no way to get off the train, doomed to watch as their companies' values sunk to levels not seen in 10 years.

With every quarterly announcement, the Street collectively cringes, waiting for the other shoe to drop.

Behind the billions of losses is the fact that the business of Wall Street (underwritings, trading, wealth management) is slowing because the economy has slowed. The recent bull market is history. So, the future quarterly earnings of each firm will suffer from comparisons to pre-subprime quarters, which were also pre-recession earnings.

Yes, there are plenty of reasons to feel crummy about the industry. Even as firms spend millions on big recruiting packages, there are plenty of branch-level hiring freezes. The biggest group of unhappy campers is made up of the branch managers. They have the most pressure on them—both to recruit and to keep the branch compliant. At the same time, more and more costs are added to the mix, effectively reducing their bottom lines and cutting their compensation. Paying more to the advisor in both transition package and payout? That comes right off of the profitability of the branch. Errors no longer being charged to the advisor because of the wage-and-hour lawsuits? It's the branch manager who's bearing the brunt of that one, too. Lastly, it's the branch manager whose stomach churns every Friday, hoping to not be on the losing end of yet another record recruiting deal.

One big-city wirehouse branch manager put it to me this way: "Never before have I had to deal with pissed-off brokers every day with such a shrinking bottom line and bad morale. It has never been tougher for me to get up and go to work in the morning."

To the advisor looking for alternative places to work, at first glance the outlook is bleak. It seems tougher and tougher to find a shop that manages to dodge the headline risk while having all the products and services expected by a high-net-worth client. The disappearance of Bear Stearns makes the discerning advisor even more suspicious, because now there's a real risk of going to a firm that clients fear will no longer be in business in a few months. In fact, early July saw even the venerable 158-year-old Lehman Brothers under siege, fighting off rumors that it was in the same type of financial straits that had crippled Bear Stearns just a few months earlier.

Sarch the Swami

One of my predictions a couple of years ago was that advisors would be forced to disclose the details of their recruiting packages. This hasn't happened—yet. But, when an advisor leaves for another shop, the losing firm often happily shares its estimate of the presumed package with the departed advisor's clients—adding this phrase to the industry's lexicon of dirty tricks: "Hey, Mr. Client, have you heard that your advisor bailed on you to head over to FirmXYZ, where he won't be able to match the breadth and sophistication of products and services that you enjoy here? The only reason that he left was to take a huge signing bonus." Nice, right?

I recently met with a million-dollar producer who has moved several times during his career. When I told him about this ploy, he explained how he informs his clients about a deal: "Mr. Client, I received $2 million to sell my business and yet I get to keep it. If you were presented with the same opportunity, what would you do?"

So, even though my prediction hasn't come to pass, retail clients are still likely to learn of the mega-packages now being offered—or at least the nasty rumors about their size—as part of a losing firm's efforts to sell against departed advisors. This is actually just one piece of the biggest trend I see in this industry going forward: transparency.