Regional B/Ds, along with independents, have been the winners of the past few years, certainly as compared to the wirehouses. There has been a lot of press lately about whether or not this momentum can continue. My answer is that yes the regionals B/Ds can maintain this momentum, but they have to be careful not to be undone by some of their traditional weaknesses.
I wrote an article on this topic which was published in today’s FundFire. Click here to read the full article, entitled “What Slows Managed Acct Growth at Regionals? In the short- and medium-term, there is no reason that this momentum will not continue. Many long-standing advisors at regional B/Ds are not going to go independent for many of the reasons that they traditionally haven’t – namely it takes a lot to run a business. They are also unlikely to go to the wirehouses in large numbers.
And the recruits that have just joined the regionals are under contract for a number of years. To me, the danger to regionals will appear as these contracts expire. Regionals have often lagged in the fee-based area not because their recruits don’t do the business – but rather that the advisors that have been at a regional firm for the majority of their careers don’t tend to do as much of this business.
While strives have been made in the quality of the fee-based platforms at the regionals, many still lag. They have time to rectify this situation – especially on the training side, where significant investments are not necessary. The successful regionals will use the growth in their fee-based revenues generated by recent recruits to invest back into their businesses and to broaden the reach of the programs to advisors who have traditionally not done the business. This should make their platforms extremely competitive and provide the newest recruits little reason to jump ship again when their contracts expire.
Regionals have the time to do this – the only question is whether or not they will. My guess is that some will and some will not. But overall, I think the momentum will continue.
