Bidding wars of any kind have risks and can be quite costly. When competition and money are involved inevitably the stakes are high in most cases so are the losses. Particularly for this type of bidding war, with brokerages battling for selection of top brokers, organizations are prepared to hand out unwarranted amounts of money for top level brokers because of the shared idea that in doing so the probability of improving their competitive advantage or market share will increase. Brokers are pursued like “top draft prospects” going into the NBA or NFL. They make out like bandits on these bidding wars, while firms lie in wait for their ROI. On average, the returns are not seen until a few years after a “bidding war.” Until a hire is made, the time frame brokerages may experience to see returns will just keep getting longer if they continue relentless pursuit of these top brokers.
On the other hand, bidding wars do not yield forgiving results to smaller firms; it’s the smaller brokerage companies who end up suffering. Given that they lack the surplus in funds to compete, when smaller firms’ top producers are recruited by larger firms, the smaller firms are financially outmatched by the larger firms offer, so smaller firms should relentlessly market and rely upon a proceeding reputation of their overall company culture and atmosphere to help retain top brokers. Bottom-line, next to the brokers winning, it’s the larger firms who can entice and recruit top producing brokers, who by the way are winning here, but at what cost? When is it enough? Is there a standard to these bidding wars? It can only be commonly assumed that once they stop producing as well or don’t make the returns back from their hiring decisions that brokerages will turn to a different means of hiring. Another financial crash is inevitable if bidding wars continue. It could be all a cover to up by the brokerage firms to camouflage all their half hazard investment decisions.