March 3, 2021
The recruitment of credit balances at Ameriprise Financial and LPL Financial continued its rise in 2020 as the companies tried to build their distribution network in independent and employee-related placement channels.
Ameriprise ended 2020 with $ 715 million in recruiting loans on its balance sheet, up 10.8% according to the annual report 12 months earlier. The Minneapolis-based company raised $ 171 million in such loans in 2020, up nearly 25% from late 2019 and 69% up from $ 101 million two years earlier, according to the Report.
The hiring bonus increases reflect the surprisingly strong broker movement across the industry during the pandemic year and the particular ability of independent broker traders to attract brokers from employee channels. LPL is the largest broker-dealer with more than 17,000 independent contractors. About 7,800 of Ameriprise’s almost 9,900 consultants are independent.
“Competition on the IBD side is greater than ever as broker-dealers are crying out for a shrinking pool of quality producers,” said Jon Henschen, an independent company recruiter, in an email. “Larger amounts are offered on forgivable bills because they attract the attention of advisors and are a motivator.”
Ameriprise has grown to be one of the most aggressive recruiting firms, despite not showing how much of its brokerage credit balances are on its employees compared to its independent channels. It strengthened its employee channel offerings in 2018 up to 320% of the recruits of the last 12-month turnover produced in their former companies.
An Ameriprise spokeswoman declined to comment on the recruiting credit balance or its offers to consultants.
Independent broker-dealers allow brokers to keep about 70% to 90% of the fees and commissions generated by their clients, compared to about 30 to 50% that salaried brokers keep. But the independent firms were also less aggressive in signing rewards.
However, LPL has opened its wallet and expanded its connectivity to satisfy his hunger for growth and to use economies of scale. According to the annual report filed last week, year-end recruiting credit balances rose 24% to $ 419.2 million as of December 31st from 12 months earlier
LPL usually offers upfront “transition bonuses” of 30 to 50 basis points of wealth Brokers joining its independent core channel are expected to move away from their previous businesses. However, recruiters said the offers have increased, reflecting the continued popularity of independence and a desire to attract disgruntled independent brokers from the United States Companies that are or have been newly acquired.
Recruiting credit balances have also risen at selected regional and national companies. Outstanding loans at Morgan Stanley, the largest wirehouse by its nearly 16,000 brokers, climbed to over $ 3 billion at year-end 2020. Balances are 8.7% higher than 12 months earlier and the first increase Morgan Stanley has reported in eight years.
UBS Wealth Management USA, which has fewer than 6,000 brokers in the US, had recruitment loans of $ 1.87 billion to financial advisors at the end of 2020, 9% less than last year. Like Morgan Stanley, UBS re-entered the recruiting market last year, despite recruiters saying they were less aggressive and focused more on employed private bankers and bank-based brokers than on network-based producers.
Independent broker-dealers offer brokers payouts of around 70 to 90% of the fees and commissions their clients generate – compared to around 30 to 50% that salaried brokers keep – although the recruitment bonuses remain significantly lower than those of salaried firms who generally pay 100% to 300% in combined front-end and back-end T12 bonuses.
According to their annual reports, consultant loans pay for themselves at both LPL and Ameriprise over a term of up to 10 years, which corresponds to the employee model of companies.
According to the annual report, LPL ended 2020 with 17,287 consultants, almost 5% more than 16,464 in the previous year. Over the same period, the average total assets per consultant increased 12.5% from $ 46.4 million to $ 52.2 million.
Ameriprise had 7,805 independent contractors in its “Franchise” channel at the end of 2020, up 65 from 7,740 the previous year. Its 2,117 employee channel brokers were down from 2,131 at the end of 2019.