Merrill Lynch losing top advisers

Working under a recent mandate not to use certain alternative investments or to sign on new public-pension-fund clients, John Beirne Jr., a 33-year veteran of Merrill Lynch who managed upwards of $2 billion in assets, quit last month to strike out on his own.

For a variety of reasons, many top Merrill Lynch financial advisers are coming to the same conclusion. Seven of the 10 largest adviser moves tracked by InvestmentNews over the past three months have involved Bank of America Merrill Lynch advisers — many of them veterans such as Mr. Beirne.

“I’m a gold watch guy, but I’m not going to get the gold watch at Merrill Lynch,” he said, echoing what many other top producers at America’s iconic wirehouse have been feeling of late.

“We would have lost accounts, and the change was interfering with an investment process we’d been using for 35 years,” said Mr. Beirne, explaining why he and three other Merrill Lynch advisers opened up shop as registered investment advisers in Milford, Conn.

The team made the move with the help of Focus Financial Partners LLC, an aggregator with 23 partner firms, collectively managing $50 billion.

For Merrill Lynch, which employs more than 17,000 advisers and managed more than $1.5 trillion at the end of last year, the departure of Mr. Beirne wasn’t an earth-shaking event. And to be sure, at a firm of its size, the normal comings and goings will involve many sizable producers.

“We can’t verify your info — but frankly, people have been calling “the great exodus’ for more than a decade now, and the facts have not borne it out,” said Merrill Lynch spokeswoman Selena Morris.

But after a few years of very low turnover in its adviser ranks, Merrill Lynch — and wirehouses in general — could see many more brokers head for the exits this year.

“We’re seeing more activity across the board when it comes to the major firms,” said Tim White, a recruiter with Kaye Bassman International Corp.

The wirehouses’ market share of assets in the wealth management industry fell to 43% in 2010, from 50% in 2007, and is expected to drop to 35% by the end of 2013, according to Cerulli Associates Inc.

“There may be more-acute pain points at Merrill Lynch, but fundamentally, I don’t see a lot of difference between the wirehouses,” said Rich Gill, head of a unit at Focus Financial that targets wirehouse advisers.

Firms with alternative business models such as Focus, HighTower Advisors LLC and Dynasty Financial Partners LLC are increasingly successful at luring top wirehouse advisers such as Mr. Beirne to the independent channel.

All three have landed major wirehouse advisers in the past three months.

“In the late 1990s, the wirehouse brands were a positive, but they haven’t survived the financial crisis,” Mr. Gill said. “How do you think it feels to have a 25- or 30-year career and now have to make excuses for your firm?”

Recruiters such as Mindy Diamond, president of Diamond Consultants LLC, anticipate greater turnover in the top ranks of the Thundering Herd this year as the retention packages put in place after the merger with Bank of America in early 2009 wind down.

Advisers producing more than $1.75 million in revenue are receiving the last payment of the earned part of their packages this year, removing one more reason for those advisers to stay, Ms. Diamond said.

“ROBUST YEAR’

“2012 is shaping up to be a robust year,” she said.

The year’s first two months already have been active.

Houston-based Merrill Lynch advisers Scott and Grant Fortney, two brothers who together managed $885 million, moved to Morgan Stanley Private Wealth Management in early January.

Just last week, Harry Wall, a veteran Merrill Lynch adviser, joined Raymond James’ Louisville, Ky., complex along with three other Merrill advisers. The team collectively managed over $850 million and generated $2.7 million in revenue.

Mr. Wall said that he wanted “a more client-centric firm that emphasized the adviser-client relationship,” and that Merrill Lynch no longer provided that for him.

“It’s not the same firm I joined 26 years ago,” said Mr. Wall, one of Barron’s top 1,000 advisers. “The combination of the bank and Merrill Lynch lent itself to a higher degree of bureaucracy, and navigating that became more difficult.”

It wasn’t any one thing that led Mr. Wall to look elsewhere.

“It was death by a thousand cuts. We were dealing with a lot of little things every day,” he said.

“We were concerned [about the merger] in 2008, but we gave it our best shot and it didn’t work out,” Mr. Wall said.

Troubling in another way was the departure last week of Peter Sargent, a 44-year old adviser in Yardley, Pa., who decided to join regional firm Janney Montgomery Scott LLC.

Managing $250 million in assets and producing about $2.2 million in trailing-12-month revenue, Mr. Sargent was an up-and-coming star at Merrill Lynch, serving on the National Advisory Council to Management at the firm and seen as a successful Generation X adviser with at least 20 to 30 years of career ahead of him.

“I felt I needed a change. My gut told me it was the right decision,” Mr. Sargent said.

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