Five things I learned about the subterranean breakaway movement at IMPACT 2010, including that Tim Oden's been promoted at Schwab

Elizabeth’s note: IMPACT is a great recruiting tool, and not only for Schwab Advisor Services. Tim Oden, the senior managing director of business development, told me the custodian was hosting almost 40 breakaway prospects, at least two with billion-dollar-plus businesses. I told him I’d noticed other that competing RIA custodians had a presence there — most obviously Fidelity, with its big advertising campaign and an office building located just steps away from the conference hall. I noticed one smaller custodian’s sales chief, who actually had a breakaway broker in tow. Oden smiled wryly, acknowledged that he knew his esteemed colleagues were around, and said, “It must be much harder to sell your company at another company’s conference.”

1. Schwab is investing in its RIA sales force in expectation of more growth; one sign of that is Tim Oden himself.

Tim Oden is well known to many advisors as managing director of business development, West Coast, for Schwab. In September, the company named him senior managing director. He’ll be overseeing the efforts of four managing directors around the country: Gage Gilham, a Schwab veteran stepping up as managing director, West Coast; Tom Cantillon, managing director, East Coast, Bill Alford, managing director, Southeast, and an as-yet-unnamed managing director for the Midwest territory.

The move was “in response to growth,” Oden said. “We’ve added feet to the street.”

He said the company has added a handful of new sales people in recent years, for a total of more than 30.

Oden continues to report to Jon Beatty, head of sales and relationship management, who in turn reports to Bernie Clark, head of Schwab Advisor Services. See:Barnaby Grist is leaving Schwab and Jon Beatty is stepping up

2. The IBD channel continues to grow in importance as a source of RIAs for Schwab.

“There’s a great deal of interest from LPL,” Oden said. (I called LPL for a response late Friday, and will fill one if I get it). IBD reps have different motivations than wirehouse brokers, Oden said. While wirehouse brokers are concerned about the conflicts of interests, IBD reps more frequently cite business concerns: they have outgrown their IBD platforms. LPL’s reps, for instance, have, on average, $20 million books of business, Oden said. The average size of a Schwab RIA is $100 million, according to Clark. Still, LPL has taken steps to makes it own platform look more like Schwab and Fidelity for advisors managing larger books of business. See: LPL’s hybrid RIA platform is fast off the mark and names new leaders for 2010

3. New wirehouse breakaways are more demanding.

Meanwhile, the flight from the wirehouse channel continues at about the same pace as this year. The most marked trend continues to be that larger teams are coming out. “The quality is improving,” Oden said, noting the wirehouse breakaways he sees now have already educated themselves about the independent model. “They tell me: I’m looking for this exact construct,” he said. Some analysts say the breakaway trend is waning because the fever-pitch crisis of 2008-9 is over, many big wirehouse teams were locked in by retention bonuses, and the banks are making some progress integrating their mergers See:Schwab and Fidelity experience seasonal slowing of breakaway activity

As for which wirehouse is the most ripe for recruitment?

“We’ve always enjoyed the culture of the Smith Barney enterprise,” Oden said.

See: Why Smith Barney is now the most target-rich environment for recruiters of breakaways

4. Almost half of breakaways now are landing at existing RIAs.

Oden said that in 2009, 42% of people breaking away joined an existing RIA firm. He expects this year to be at about that same level, or a little higher. In part, he said that reflects the growing ability of existing RIAs to recruit breakaways.

5. Some breakaways are networking themselves into existence before they leave.

Maybe even more interesting, he said, is that he’s seeing brokers network themselves into teams. A couple of advisors will know each other from different wirehouses, figure out their interests are aligned, and then decide to form an RIA, said Oden, who said he’s seen 15 or 20 teams that formed from different companies.

There are advantages and disadvantages to Schwab in this trend, he said.

On one hand, the transition can be complicated, because the brokers are coming from different platforms. In some cases, one may be leaving a Protocol firm, and another, one that is not a Protocol firm.

On the other hand, the pre-networked breakway is helpful to the sales effort, Oden said, because it means that the team has already negotiated its own way through some of the harder points, like what everyone’s capacity for risk is.

In addition, it means that a transition from wirehouse to independence can happen sequentially, rather than all at once. The advantage to that should be obvious to any breakaway team that’s ever worked frantic weeks and months moving a book of clients over all at once.

Easier for the wirehouse

Finally, Oden said, flights of this sort may be easier for a wirehouse to take. When an entire team leaves a wirehouse, the departure may decimate a local office. If one or two brokers leave, it’s easier for the wirehouse to brush off — and just maybe, the wirehouse won’t work so hard to retain the clients.