Rising recruiting costs raise AI risk to advisor hiring

On July 22 and 23, 2025, leaders at Ameriprise, Stifel and Raymond James addressed analyst questions on earnings calls about rising advisor recruiting costs and the potential impact of artificial intelligence on advisor revenue.

Ameriprise Chief Executive Jim Cracchiolo described some recruiting offers as “crazy” and questioned the assumptions behind large transition deals, saying some firms now wait as many as eight years to recoup recruiting investments on a cash basis. Stifel Chief Executive Ron Kruskewski called transition offers “as competitive as I’ve seen” and raised the prospect that firms are “increasing investments into a business that apparently is going away,” while suggesting AI could also make advisors “more capable and efficient.” Raymond James Chief Executive Paul Shoukry stressed the need for consistent recruiting from quarter to quarter and said his firm competes on culture and capabilities rather than the largest checks.

Recruiting typically takes the form of loans to advisors that are forgiven if recruits remain at the new firm for a set number of years. Competition has pushed deal sizes higher, with some offers equal to four or five times an advisor’s prior‑year revenue. Those unpaid loan balances appear on firm balance sheets and have risen sharply from 2024 to 2025.

Ameriprise’s outstanding recruiting loan total increased 25% to $1.67 billion. Raymond James’ balance rose 22% to $1.67 billion. Stifel’s recruiting loan balance grew 9% to $745 million. LPL Financial’s balance jumped 71% year over year to $3.68 billion in 2025. Morgan Stanley reported the largest recruiting‑loan balance in the sector at $4.86 billion.

Recruiting offers rest on expectations that recruited advisors will grow revenues over time. Jason Diamond, president of Diamond Consultants, noted transition deals assume advisors will hit certain performance goals and that if future market conditions or technology reduce advisors’ ability to grow revenue, the economics of those deals would change. Cracchiolo said firms may be “so enamored with people paying up” for assumed growth that they risk mispricing long‑term profitability.

One revenue source under scrutiny is income from cash sweeps, where firms move clients’ uninvested cash into partner banks and earn the spread on lending. LPL confirmed it is reviewing its cash‑sweep policies because those arrangements are a significant source of income that could be affected by shifts in client behavior or technology.

Industry consultants highlighted counterexamples where heavy recruiting coincided with growth. Phil Waxelbaum, founder of Masada Consulting, pointed to LPL’s second‑quarter results showing assets under management of $2.6 trillion, up 71%, and revenue near $5.2 billion, up 35% year over year. Waxelbaum also cited Morgan Stanley’s wealth management revenue of $8.9 billion in the second quarter alongside that firm’s sizable recruiting balance.

Raymond James reported it set aside $117 million for recruiting in the second quarter, an increase of nearly 21%, and said it brought in advisors managing about $23 billion in client assets who had produced roughly $156 million in annual revenue at their previous firms. Shoukry reiterated that when a firm lacks a differentiated value proposition, “the highest check is all you have.”

Executives and consultants expressed differing views on how automation will affect advisor roles. Many expect routine tasks to be automated and advisors to use technology to handle those tasks, while acknowledging a risk that technology could reduce revenue streams that currently help justify large recruiting payouts.

The comments during the late‑July calls focused on the balance firms face between near‑term financial metrics and spending to recruit advisors as they assess how technology could change revenue sources that support those recruiting investments.