If anyone had reason to care about advisor headcounts, it would most likely be industry recruiters whose jobs are in part to keep tabs on comings and goings at big firms.
But with fewer and fewer wirehouses now reporting how many advisors they have on their payrolls, many recruiters are instead responding: Good riddance.
Phil Waxelbaum, the founder of Masada Consulting, said it's questionable whether
For one, Waxelbaum said, the difference in revenue generation between seasoned advisors and newcomers to wealth management used to be much smaller than it is today.
"Now the spread is closer to zero to $15 million," Waxelbaum said. "So yeah, headcount doesn't matter as much, because every time you add an advisor, you don't necessarily change the average revenue per advisor."
Dwindling herd
Bank of America's Merrill
In no longer reporting the figures, Merrill was following the lead of two of its wirehouse rivals: Morgan Stanley and
.
Talking to analysts in April 2021 about his firm's decision to drop headcounts, former Morgan Stanley CEO James Gorman said, "Once upon a time, when we had just the core business, that number of financial advisors and productivity per financial advisor were basically the only two metrics you needed to follow. And now we've got like 30 different things that are bobbing along."
Waxelbaum agreed that industry innovations have played a large role in the diminishing significance of headcounts. Technology, for one, has increased the number of accounts a single advisor or small team of wealth managers can handle.
"You couldn't have a $15 million advisor 10 years ago, because it would have been physically impossible to service that client base," Waxelbaum said. "It wasn't that we didn't have advisors that were capable. They just didn't have the tools."
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A lot of innovation in the industry, Waxelbaum said, has been driven by a simple desire to reduce costs. The need for fewer advisors has just been a happy side-effect — particularly for an industry that has been
"I'm sure it's been said in boardrooms: Guys, we cannot meet the headcount attrition," Waxelbaum said. "It's not possible. We can't recruit enough. We can't train enough. Nobody can. The body count just isn't there. So we've got to put our foot all the way to the floor with technological improvement."
Hiding embarrassment
But industry trends are only part of the story. One reason many firms no doubt have become loath to report headcounts is that their numbers have been shrinking.
Louis Diamond, an industry recruiter and the president of Diamond Consultants, said there's no doubt that a desire to avoid embarrassment is at least partly behind the halts in headcount reporting at some firms.
Diamond said all the wirehouses would most likely be reporting the numbers "if they could tell the narrative that we're actually growing or that we're about flat."
Diamond, whose own firm publishes a report
"A lot of these teams are being replaced with trainees and people without much industry experience," Diamond said.
A far more useful number to know, Waxelbaum said, would be the average amount of revenue generation for each advisor on staff.
"And I'll give you another statistic that nobody reports," he said. "Nobody reports average tenure within headcount. So if I have 10,000 people that were minted last Thursday, is that more valuable than a firm that has 3,000 with a 20-year average tenure?"
More fun with numbers
Bill Willis, the founder and CEO of Financial Advisor Recruiters, said firms have other ways to play with the numbers. There are many people on staff at large wealth management firms that have industry credentials but don't actually provide financial advice, he said.
"A lot of the sales assistants and a lot of the home office assistants hold Series 7 licenses," Willis said. "So they can be included in the headcount when they're trying to fudge around."
Waxelbaum said firms use numbers to obscure reality in other ways.
The banking giant reported having 5,571 client advisors at the end of the first quarter. But Waxelbaum said the figure doesn't say how many of them actually rely on a traditional advisory business model in the firm's J.P. Morgan Advisors unit and how many are bank branch employees who also happen to offer wealth management services.
"They have a large headcount, but only when you're looking at their brokers in the bank — the folks who are sitting in the Chase branches," he said.
Who's left
Merrill's decision to drop headcounts leaves UBS, Citi and
Recruiters aren't the only ones who won't miss the figures. Analysts say they get little use of them as well.
Suryansh Sharma, equity analyst on Morningstar, said advisor headcounts certainly aren't the first thing he looks at when trying to gauge how a particular firm is faring.
"It's also not the second thing or even the third thing," Sharma said. "It's really not moving the needle for me. For a private bank, the greater indicator is deposits or, for a wealth manager, it's the assets under management. That is much more important than the number of advisors."
Waxelbaum said he wouldn't be surprised if more firms followed Merrill,
"The numbers that matter when it's all said and done are revenue and expenses. Is revenue trending up, and expenses are trending down?" he said. "That's how you run a business."
"I don't care anymore if you have Jabba the Hutt sitting in the corner of a branch and Jabba the Hutt does $100 million in revenue than if you have 30 advisors who are creating $100 million revenue," Waxelbaum added. "What matters is: What is the margin of profit?
