Number of 'breakaway brokers' fell in 2010

The number of "breakaway brokers" moving to independent adviser firms fell last year after a record 2009, as the flood of brokers fleeing big Wall Street firms slowed.

Charles Schwab Corp, the country's largest custodian, added 163 breakaway teams in 2010, down 5% from 172 teams in 2009, according to the company.

Fidelity Investments saw an even bigger drop-off. It added 146 brokers and teams in 2010, a 24% decrease from the 191 teams it added in 2009, according to the company.

Fewer brokers are now leaving the big brokerage firms, such as Morgan Stanley Smith Barney and Bank of America Corp's Merrill Lynch, due to generous retention packages handed out during the financial crisis to keep them in their seats.

At Schwab, about two-thirds of the breakaway teams came from the big brokerage firms last year. The remainder came from other independent broker-dealers, a 40% increase from a year earlier, said Clark.

He believes that many brokers left the big firms during the financial crisis and went to a "halfway house" independent broker-dealer, such as LPL Financial, where they were still tied to the parent company.

"Now they've grown their business and want more sophisticated products and open architecture," said Bernie Clark, head of Schwab Advisor Services.

At Schwab, a third of the breakaway teams joined an existing independent firm that uses Schwab to hold client assets and execute client trades. The remainder started their own independent firms.

The teams oversaw a combined USD 12.6 billion of client assets, with the average team overseeing USD 75 million of assets, roughly steady from 2009.

The brokers who moved to Fidelity in 2010 brought more client assets with them than in the past. The new recruits oversaw an average of USD 83 million of client assets each in 2010, over 50% more than USD 56 million in 2009.

The breakaway teams added a combined USD 12 billion in assets to Fidelity in 2010.

"While the absolute number of brokers going independent seems to have normalized to pre-crisis levels, we continue to see an increase in the number of large teams with bigger books," Michael Durbin, president of Fidelity Institutional Wealth Services, said in a statement.

TD Ameritrade Holding Corp bucked the trend, bringing on 70 breakaway teams in fiscal 2010 (through to September 30), a 40% increase from a year earlier. The company declined to provide any information on client assets.

Pershing LLC, a unit of Bank of New York Mellon Corp, added 40 breakaway teams in 2010 with combined assets of USD 6.2 billion. Thirty teams started their own firm and 10 teams joined existing firms. Numbers for 2009 were not immediately available.