February 15, 2011

BNY Mellon's Pershing Unit Releases New Study on Broker-Dealers' Current Challenges and Opportunities for Recruiting and Retaining Talent

JERSEY CITY, N.J., February 15, 2011 — Pershing LLC, a BNY Mellon company, announced today the availability of an independent study, The Race For Top Talent II, that expands on the findings in the inaugural, The Race For Top Talent report published in 2007. The study reveals that many of the talent issues uncovered three years ago remain unsolved and offers new insights into overcoming the critical human capital challenges facing broker-dealers.

The Race For Top Talent II, an important component of TalentConnect(SM), an innovative Pershing program designed to help financial organizations attract, retain and develop top talent, was developed in conjunction with FA Insight.  Featuring analyses to help broker-dealers identify key trends and grow revenue, the study offers solutions for the aging workforce, mounting recruiting and marketing costs, rising turnover and developing the next generation of investment professionals.  

Key findings from the study include:

  • Broker-dealer demand for investment professionals could outstrip supply – The number of investment professionals has remained largely unchanged at approximately 310,000 over the last few years, and investment professionals are aging with no clear source of talent emerging to counter a pending retirement wave.  The percentage of investment professionals over 55 years of age increased from 32% in 2007 to 36% in 2009.  Despite this demographic trend, broker-dealers have pruned low producers to improve profits as financial markets have struggled.  At independent broker-dealers, investment professionals with less than $50,000 in production dropped from 55% of affiliated investment professionals in 2005 to 42% in 2009.
  • Investment professionals' migration is creating winners and losers – Investment professionals' willingness to switch firms creates opportunities and challenges.  According to the study, just 2% of brokerage-affiliated investment professionals with $50,000 or more in Gross Dealer Concession (GDC) would target a wirehouse when changing firms.  Nearly half (47%), preferred an independent broker-dealer, and 22% would seek to join or start an RIA.
  • Retention needs attention – In 2009, 1.2 investment professionals left the average independent broker-dealer for every new investment professional recruited. And while 64% of investment professionals report that they are "very unlikely" to leave their current firm, 12% say they are at least somewhat likely to move to a different firm within the next three years. This translates into 11,600 broker-dealer affiliated investment professionals seeking to join a new firm each year.  Better retention also helps to reduce a firm's dependency on recruiting. With just a one percentage point improvement in annual retention, the typical broker-dealer extends the expected tenure of its average investment professional by five months.
  • Quality services and support provide a strong foundation for attracting and retaining top talent – In rank order, independence, firm brand, and services and support are the top reasons that drive an investment professional to join a particular broker-dealer.  The top three reasons investment professionals decide to stay with a broker-dealer in order of importance include services and support, culture and independence.  Providing investment professionals with the freedom to offer products and services that are in the best interests of their clients can strengthen both recruiting and retention.
  • Developing entry level investment professionals can provide a key competitive advantage – Helping new or less experienced investment professionals advance their skills and supporting the growth of their businesses provides a competitive retention advantage that directly contributes toward increased broker-dealer profitability.  Career development for the less experienced investment professional can nicely complement a broker-dealer's succession program. The challenge for the broker-dealer is to put a program in place that provides senior investment professionals with a mentoring framework for advancing their less experienced subordinates.

"With many investment professionals moving toward retirement or more independent business models, a broker-dealer's growth will increasingly be tied to its ability to successfully attract, develop and retain top talent," said Jim Roth, managing director of Pershing.  "In working with our independent broker-dealer customers, we emphasize the importance of creating compelling differentiators that attract and retain investment professionals, which will help provide firms with a clear competitive advantage in the years ahead."

Dan Inveen, Director of Research at FA Insight added, "The market for talented investment professionals is poised to become even more competitive as demand exceeds supply.  To succeed in this environment, most firms will need to change the way they manage their human capital assets."

To receive a copy of the study, please visit www.pershing.com or send your request to marketing@pershing.com.

TalentConnect is a component of Pershing's Ideas Without Limits(SM) practice management program for broker-dealers and registered investment advisors.  TalentConnect offers valuable research, insights into trends shaping the recruiting market, workshops led by industry-leading consultants and a wide range of tools for attracting, retaining and developing top performers including, guidebooks, podcasts, white papers and marketing support.  

Pershing LLC (member FINRA/NYSE/SIPC) is a leading global provider of financial business solutions to more than 1,500 institutional and retail financial organizations and independent registered investment advisors who collectively represent approximately five million active investors. Located in 21 offices worldwide, Pershing and its affiliates are committed to delivering dependable operational support, robust trading services, flexible technology, an expansive array of investment solutions, practice management support and service excellence. Pershing is a member of every major U.S. securities exchange and its international affiliates are members of the Deutsche Borse, the Irish Stock Exchange and the London Stock Exchange. Pershing LLC is a BNY Mellon company. Additional information is available at www.pershing.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $25.0 trillion in assets under custody and administration and $1.17 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at www.bnymellon.com.