For a growing number of investment advisers, Main Street has become more attractive than Wall Street. Take Main Street in Redlands, Calif.
Retail brokerage Edward Jones has three offices in town. Each is manned by a Merrill Lynch alum, including Shawn Price, who joined the company in April after 14 years as an investment adviser with the "herd," many of whom seem to be doing as much wandering as "thundering" these days.
In many ways, investment advice has gone the way of fine food, with small and local prized over mass offerings -- the farmer's market over the supermarket.
Retail investors are long on advisers like Price, creating thousands of opportunities for money coaches looking to join a new team or go it alone. It's a risky proposition, but then again, so is the rest of the finance industry these days.
Edward Jones, for instance, grew by 8% last year and plans to swell by a similar pace through 2012. This year, the private, Missouri-based company is aiming to add more than 1,000 brokers.
Unlike Merrill, Edward Jones did not get much coverage in the financial crisis, which Price considers a good thing.
"People are thirsting to meet somebody face-to-face," he said. "They're tired of the 800-numbers, they're tired of the names in the news. They see 'Edward Jones' and they think: 'That's not in the news.'"
Instead of hiding his client files from dozens of other brokers, Price shares tips with the two other Edward Jones advisers in town. He takes his wife out for lunch and knocks off around 5 p.m. to watch his son run cross-country and help out with the Boy Scouts. Price occasionally meets with clients on Saturdays, which he does not mind; he'll most likely see them the next day in church as well.
"I call this my Mayberry dream -- to be back working in my own community," he said. "I have always wanted that and I finally have it."
Edward Jones has been making a push to recruit established brokers like Price, by dangling a pay package based on how many assets come over in the transfer.
"It's not new, let's just call it enhanced," said Edward Jones spokesman John Boul on his firm's pay policy.
Geographically, the firm is focused on hiring 250 advisers each in Anaheim, Calif., Phoenix, Ariz., and Toronto, Canada.
Florida-based Raymond James is also bulking up. In the year ended June 30, the brokerage added about 400 advisers, bringing its stable to just more than 5,300. It has pledged to keep the pace for the next few years.
More advisers are starting their own shops as well. Charles Schwab signed agreements to manage the accounts of 123 new independent advisers last year and about 100 to date in 2009 -- shops sized from one person to dozens. At the end of June, "Chuck" had $505.4 billion outside investments under custody, up from $477.2 billion at the start of the year.
"I don't think demand has ever been higher than it is right now," said Bill Willis, who recruits investment advisers for wirehouses as well as a wide range of bricks-and-mortar brokerages. "Everybody's got empty desks; everybody wants to fill them; and nobody has trained anyone for the past few years."
The empty desks reflect how the economy and the role of finance have changed in the past 12 months. Some of the biggest names in the business now exist only in headlines and today's retail investors are wary of Wall Street barons wagering on esoteric derivatives and interest-rate swaps.
Despite massive shrinking among Wall Street firms, the number of investment branch offices in the U.S. has increased by 516 since September 2009, according to the Financial Industry Regulatory Authority.
Many advisers are going it alone, rather than adjusting to the corporate culture of a new parent. Others are tired of being tied to a big-name brand and pitching proprietary products.
The big incentive, however, is being your own boss. And though the money may not be quite as good as at the giants of Wall Street, you eat what you kill, as they say. At Edward Jones, for instance, advisers generally take home between 20% and almost 60% of production -- the greater share coming with greater asset levels.
Brian Carlis, an attorney at New Jersey-based law firm Kelly, Stark & Stark, will help about 50 advisers transfer out of traditional brokerages this year. His clients will no longer have to worry about when to leave the office, or have to pitch proprietary, commission-based products.
"Typically, the revenue does get better," Carlis said. "But most folks will tell you that money's not the only reason. It's freedom, autonomy and wanting to be able to do the right thing for their clients."
Carlis noted that it is also easier for independent advisers to sell their "book," their accumulated client list and assets under management. Wirehouses and other traditional brokerages usually arrange for some type of sunset payment when a broker retires, but it is seldom as lucrative as an open-market transaction.
Still, the business is not for everyone. Annual turnover at Edward Jones, for example, is almost 15%. The most successful independent investment advisers have an entrepreneurial nature, according to Lindsay Tiles, a spokeswoman for Schwab's unit that manages holdings for independent adviser shops.
"Not everyone wants to worry about what kind of copy-paper to buy and office furniture and those aspects that go into starting a business," she said.
The first steps, according to Tiles, are drawing up a business plan and hiring an attorney.
Under a "protocol" agreement signed by over 150 retail investment shops, advisers are allowed to take with them a list of client names, phone numbers, e-mail addresses and account names when they leave a firm.
However, big firms are more aggressively pushing non-solicitation agreements on individual advisers. These agreements provide a window of time when an ex-employee cannot pitch business to clients of his or her former employer. If they win a temporary restraining order, the fleeing broker typically pays a settlement equal to about 15% of their trailing 12-month commissions, according to Carlis.
"I tell clients that this is the purchase price of freedom," he said. "Every dollar is precious on the street right now."
The flow of advisers away from traditional brokerages may be slowing down. The major players have started to fight back by dangling bigger signing and retention bonuses. Wirehouses are offering top producers signing bonuses up to 140% of trailing 12-month fees, according to one recruiter. For a broker that produced $1 million in the past year, that equates to a $1.4 million check before even picking up the phone at a new desk.
Going It Alone: A Checklist
-- Have a decent book: To be legitimate to the SEC, you will need at least $25 million under management in the first 120 days. Most brokers don't make the leap from an established shop unless they know that at least as much money will be coming with them. If you aren't yet an adviser, you'll have to ramp up fast.
-- Be certified: being a Chartered Financial Analyst isn't necessary, but extra titles help add legitimacy.
-- Draw up a business plan: Answer all of the important questions in advance. Who will you target? How will you market your services? How much do you want to grow? Etc.
-- Make a list: Brokerage protocol allows you to take names, addresses, phone numbers, e-mail addresses and the account titles of current clients.
-- Call a lawyer: If you are hanging a shingle, you will need to incorporate a new business and have some contracts written up. And if you are just joining an independent shop, odds are good you will need to wiggle out of some sticky attachments to your previous employer.
-- Go shopping: You will need an office, chairs, utilities, printer paper -- all of those things that you probably haven't considered since moving into a college dorm.
: Starting Up: How to Launch Your Own Independent Financial Adviser Business
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