"Ultimately, what we're seeing right now with the turmoil in the financial system and the merger and acquisition of firms is the difficult position that brokers are being put in."

Pirker was able to pinpoint specific characteristics of those brokers who may be considering going the independent route. Thirty-five percent of employees at firms with more than 10,000 employees as well as 33% with tenure of six to 10 years were mostly likely to leave, according to the data. Forty-one percent of brokers with clients having assets between $10 million and $99 million and 35% with 100 or more clients also considered going independent.

Since the start of the credit crisis in July 2007, brokerage firms have been faced with a roller coaster of changes, Pirker said. Many have recently written down large amounts of bad debt caused by misjudgments in their investment banking businesses, and some have been acquired by competitors as a result. The largest brokerage firms have been particularly affected. Merrill Lynch was recently acquired by Bank of America. Wachovia is set to be bought by Wells Fargo and Wachovia Securities is in the process of integrating its recent acquisition of A.G. Edwards. Meanwhile, Morgan Stanley has turned itself from a brokerage firm into a bank holding company.

"Given that employee brokers' compensation depends largely on their underlying book of business for generating commissions or recurring fees, brokers have a great interest in protecting their client relationships and doing whatever is best for their book of business." Pirker explained.

So far, there does not appear to be a trend in the movement with brokers leaving credit union-owned or affiliated broker-dealers. Some of those brokers looking for other career streams could even be a boon for CUSOs and other firms that work with credit unions.

"We are not seeing reps leaving in large quantities to become independent. Bank and credit union brokers are not facing the same issues that their counterparts at Merrill and Morgan Stanley are facing," said Mark Hoaglin, senior vice president, credit unions at LPL Financial Institution Services. "In fact, I believe this is an opportunity for financial institution broker-dealers like LPL to pick up some of the retail brokers who are leaving the wirehouses."

With more than 11,000 financial advisers, LPL Financial is considered to be the largest independent broker-dealers in the country. Hoaglin said in many cases, the advantages of working in a bank or credit union environment outweigh the perceived advantages of going independent. He pointed out that many broker-dealers like LPL have fee-based products, managed money programs and other financial solutions that rival the best independent firms.

"One of the big differences, of course, is that many independent firms will pay up-front bonuses for a rep to bring his [or] her book of business," Hoaglin explained. "The financial institution broker-dealer has to counter with the great work environment and opportunity to leverage the access to bank customers or credit union members."

A big part of the decision to go independent has much to do with control, said Michael Melby, president/CEO of CUE Financial Group Inc., a registered investment advisory firm and broker-dealer that serves credit unions and banks. Some prefer having more say over compensation and commissions as well as being able to build their own brand "rather than suffer the vagaries of the company whose name is on the building." Others like being in charge of running an office and bringing in needed personnel and technology support. However, Melby said another tendency has emerged.

"There is a bit of a contra-trend where we're also seeing some of the older, independent reps who have been independent for quite a while and are trying to slowly do other things in their lives. They're coming back to us and looking at an employee model," Melby said.

Of note are the court decisions, particularly in Arizona and California, which are siding with reps regarding who owns the books of business, Melby said. That backing is important for those brokers who may have to contend with noncompete agreements.

Still, Pirker said not every broker is cut out to be an entrepreneur. Every type of firm, including those within the credit union industry, is looking to big firms to court brokers. Over the next few years, there will be plenty of movement between brokers at well-known brokerages to other entities.

"Unless the brokerage houses manage to convince their brokers that the firm's situation will stabilize very soon, brokers might come to the conclusion that their employer no longer provides the best environment for growing that book of business," Pirker said.

Those brokers that have solid productivity are likely to resign. Forty percent of those with an annual production of between $200,000 and $499,000 and 43% whose business improved in 2007 fall into this category, according to Aite. Forty-five percent of those with recurring fees that make up between 25% and 50% of total production are also primed to leave.

What should firms do to keep brokers content and therefore less apt to depart? Pirker said retail brokerage firms must find ways to increase their support for emerging top producers, helping them to grow their book of business to the next level through advice processes supported by technology. Competitive compensation and ongoing communication are also critical.

"It is clearly in the best interest of retail brokerage firms that find themselves battered from the recent market crisis to stabilize the situation at their firm as soon as possible and provide necessary monetary incentives to compel brokers to stay at their firm in these difficult days," Pirker said.

Hoaglin said the status that used to come with working for large firms such as Merrill Lynch is not as prevalent. He agreed with Aite's findings, saying he expected to see an exodus from large wirehouses.

"The Merrill brokers are probably the most loyal brokers because of the pride their reps had in working for 'Mother Merrill,'" Hoaglin said. "That is gone now. Compounding matters is the negative stigma associated with the wirehouses in light of the subprime crisis."

–[email protected]