Broker-dealers focused on recruiting, retention

Recruiting brokers and advisers, and retaining solid producers, are the two leading business strategies for broker-dealers over the next five years, according to a new survey of industry executives.

Recruiting representatives was the first or second priority of 56% of the executives — from 134 broker-dealers — who responded to the survey, while hanging on to top talent was the first or second priority of 45%.

The broker-dealers were a cross section of the industry and included retail firms with 20 or more reps, discount firms with five or more brokers, and institutional firms with six or more traders.

Recruiting and retaining top talent ranked higher than a variety of other broker-dealer needs, according to the survey. Those included introducing products and services, and acquiring and retaining investors.

The survey, released last Wednesday by National Financial Services LLC of Boston, also reported that independent broker-dealers put a greater focus on hiring and retaining reps and advisers than other kinds of firms.

Seventy-two percent of responding executives from independent firms and 56% of those from all firms rated hiring and recruiting as a first or second main concern in the next five years.

National Financial, which has about 340 clients deploying more than 86,000 brokers, is the clearing unit for Fidelity Investments.

With compliance costs for broker-dealers more than quadrupling, clearing firms such as National Financial have an opportunity to add services to firms, said Norman Malo, the firm’s president and chief executive. Over the past five years, compliance costs have increased to 30 cents on the dollar, from 7 cents, he said.

Increased turbulence in the brokerage industry is pushing firms to seek help from their clearing firms, Mr. Malo said.

The number of brokers coming into the business continues to decline, he said, and succession planning is also proving to be a problem.

“The training of brokers is being transferred over from broker-dealers to clearing firms,” said Mr. Malo, who spoke in New York to journalists last Monday.

The same day National Financial released its survey, it announced the launch of two programs for its clearing clients to strengthen recruiting and broker development. “It’s not revolutionary in the concept, but the technology is,” Mr. Malo said.

The stakes in the current market are enormous, he noted. As the baby boomers move to convert their savings into retirement income, $20 trillion will be in play, Mr. Malo said.

“Technology solutions allow reps to be more productive,” he said.

Bruce Kelly can be reached at [email protected].