Understanding the Role of Recruiting Loans in Wealth Management Growth

Posted on September 17th, 2024 at 1:40 PM
Understanding the Role of Recruiting Loans in Wealth Management Growth

From the desk of Jim Eccleston at Eccleston Law

Recruiting loan balances can offer insight into a wealth management firm's growth strategy, but they do not tell the whole story. Industry compensation consultant Andrew Tasnady told Financial Planning that firms that have seen the most revenue growth in recent years often have large recruiting loan balances.

However, not all firms are growing as fast as their loan balances suggest. Ameriprise Financial, which saw its headcount increase by less than 1% from 2018 to 2023, also saw its recruiting loan balance grow by 117% to $1.2 billion.

In contrast, LPL Financial, the largest independent broker-dealer, more than doubled its headcount over the past five years, thanks to aggressive recruitment and acquisitions. LPL’s recruiting loan balance rose nearly 400% to $1.48 billion, while its annual revenue increased by 94 percent to over $10 billion in 2023.

Financial Planning reports that the disparity between Ameriprise and LPL highlights the importance of understanding what firms are truly gaining from their recruitment investments. While large loan balances suggest significant recruitment activity, firms must evaluate whether their growth strategies are effective.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

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