As anxieties swirl that America's tech giants are betting too much on AI, some in wealth management are sounding alarm bells about overspending on advisor recruiting.
Recent earnings calls have made it clear the two sources of concern are related.
Talking to analysts on July 23, Ameriprise CEO Jim Cracchiolo described the recruiting offers some firms are making as "crazy." The day before, Stifel CEO Ron Kruskewski said industry transition offers are now "as competitive as I've seen." Even Raymond James CEO Paul Shoukry, who takes pride in his firm's ability to recruit without offering the biggest transition checks, told analysts of the importance of maintaining consistency in recruiting deals by saying recruiting isn't something that can be turned "on and off quarter-to-quarter."
The comments came in response at least partly to worries analysts have raised about AI's potential to automate tasks that are now big revenue generators for wealth managers. Kruskewski made the connection between possible AI disruption and recruitment spending most obvious.
"Either the largest wealth management firms in the world are increasing investments into a business that apparently is going away," Kruskewski said. "Or, as we see it, the industry will continue to evolve with more capable and efficient advisors using AI to benefit their productivity and their client service."
How AI could undermine recruiting economics
Many industry executives and analysts are quick to dismiss suggestions that AI, roboadvisors or some other technological advance will one day replace human advisors. Many instead predict that the automation of routine tasks will merely give advisors more time to spend with existing and new clients.
A bigger concern is the possibility that AI systems could eat into the revenue that firms make by moving clients' uninvested cash over to banks to be lent out at high rates. The brokerage giant LPL Financial has acknowledged it is reviewing its "cash sweeps" policies to protect this lucrative source of income.
Jason Diamond, the president of the recruiting firm Diamond Consultants, said there's little doubt that AI has brought a new twist to long-running debates about whether firms spend too much on advisors recruiting. He said transition offers are made with the assumption that recruited advisors will hit certain performance goals in coming years.
"And what looks like a good deal assumes things like advisor growth and assumes things like advisors being able to maintain revenues," he said. "But if they no longer can grow revenues, then those deals that they priced seem like smart deals because what was the case when the world was A may no longer be the case when the world is B."
Cracchiolo of Ameriprise hinted at this uncertainty when he questioned the profitability assumptions underlying large recruiting deals. He said some firms now are finding they have to wait as many as eight years to recoup their recruiting investments "on a cash basis."
"We're so enamored with people paying up because they get some totality of growth that may translate into profitability truly in the end," he said. "I don't know whether it will or not fully."
Recruiting: Why firms do it, and which ones do it the most
Far from an expense that can be easily pared back in the face of hypothetical AI threats, recruiting remains central to most wealth managers. Many in the industry see it as a means not only of bringing in new assets and clients but also backfilling for departed advisors who themselves may have been recruited away to other firms.
Most recruiting deals come in the form of loans to advisors that are typically forgiven if the new recruits stay put at their new firms for a set number of years. Competition among firms has driven the amounts on offer steadily upward. Deals are now sometimes equal to as much as four or even five times the revenue a recruited advisor or team generated in the previous year.
Increasing recruiting costs show up in the loan balances firms report every year showing how much advisors still owe them after being paid to join from another firm. From 2024 to 2025, Ameriprise's outstanding loan total went up by 25% to $1.67 billion, and Raymond James' by 22% to $1.67 billion. The more conservative Stifel meanwhile saw its rise by 9% to $745 million.
Outstripping them all has been LPL Financial, whose executives pride themselves on the firm's place as the industry's top recruiter. LPL — the largest independent broker-dealer by advisor headcount, revenue and most other meaningful measures — saw its recruiting-loan balance rise by 71% year over year to $3.68 billion in 2025.
The biggest recruiting spenders often see the most growth
Phil Waxelbaum, the founder of the recruiting firm Masada Consulting, said LPL presents strong reasons to doubt the notion that firms are overspending on recruiting. Even as its recruiting loan balance has climbed, so has its revenue and client assets under management. Its asset tally was up 71% to $2.6 trillion at the end of the second quarter and its revenue by 35% to nearly $5.2 billion.
Waxelbaum also cited Morgan Stanley, whose recruiting loan balance of $4.86 billion was easily the largest in the industry in 2025. Morgan Stanley's wealth management business also recently saw its revenue hit a record $8.9 billion in the second quarter.
Waxelbaum said he thinks the complaints about overspending come from a sense that firms could be offering shareholders more in the present if they weren't under pressure to allocate so much to recruiting.
"We could have earned $1 per share, but because we had to compete a little bit more aggressively on recruiting, we earned 90 cents a share," Waxelbaum said. "It cost us that much money, and we didn't have to do that. We could have earned $1, and everybody's deal should and could have been a little bit less."
Some wealth management executives seem to view generous recruiting deals as short-sighted responses to industry competition, Waxelbaum said. He has the opposite take.
"What we're really looking at is: How much are these organizations prepared to invest into their three-year, five-year, or 10-year future?" Waxelbaum said. "Because recruiting is not just a return on investment in the first quarter or in or in the fiscal year … I can actually argue, which is kind of interesting, that the entities that are recruiting with a high dollar value are playing the long game, not the short game."
Can culture, support services overshadow big recruiting checks?
Raymond James is one of the few firms that reports how much it sets aside for advisor recruiting. Its spending for that purpose was up by nearly 21% to $117 million in the second quarter, when it brought in advisors managing nearly $23 billion in client assets and producing $156 million in annual revenue at their previous firms.
Also unlike most other firms, Raymond James publicly states how many advisors it either employs directly or has working as independent contractors. When it last reported its advisor count, in October, it had risen by nearly 2% year over year to 8,943.
Shoukry said in Raymond James' latest earnings call that he and his fellow executives recognize they have to compete to an extent with the size of their recruiting deals.
"But we lead with culture and capabilities," he said. "So we have a true differentiated value proposition. In the absence of a true differentiated value proposition, the highest check is all you have."
Cracchiolo, after noting that Ameriprise brought in nearly 80 experienced advisors in its latest quarter, similarly contended that his firm can compete on more than recruiting deals.
"I think, optically, people are looking at checks," he said. "But when you look and take into account the productivity growth, the support, the servicing, how they can operate, the economics in the end come out really in our favor."
Waxelbaum said there's at least one flaw in firms' attempts to distinguish themselves with attributes like technology, support services and "culture" — a catchall word often used for firms' general ways of doing business. By now, most of these things have become common property, he said.
All else being virtually equal, advisors are bound to put weight on the money they could make by moving from one firm to another. If an advisor is offered a low recruiting deal, most will conclude changing affiliations isn't worth the hassle.
Add a bit to the offer, and many will at least say, "tell me more," Waxelbaum said. At some point, he said, they'll be saying, "OK, pack the boxes."
As for the chances that AI will somehow undermine these calculations, Waxelbaum is just as skeptical as most in the industry. Too many people, not least advisors themselves, have a vested interest in making sure there remains work to do that can't be automated.
"If we decide to keep hitting the 'easy' button, it's going to work for a while," Waxelbaum said. "And then it's going to bite us in the ass hard because it won't take long for the general population to go: Wait a second! I ran this question about dividend reinvestment through [AI], and it gave me the exact same answer as the advisor did. What the hell do I need the advisor for?"
