Morgan Stanley suffers big client asset loss in 3Q as advisers split

One recruiter says wirehouse "under seige," but firm says attrition at near-record low

Oct 4, 2013 @ 12:01 am

By Trevor Hunnicutt

morgan stanley, ubs, merrill lynch, wells fargo, wirehouse, attrition, clients
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(Bloomberg)

Morgan Stanley Wealth Management, the nation's largest brokerage by adviser head count, lost $8.4 billion in client assets during the third quarter, as some of its major producers took their business to competing firms.

In the three-month period ended Sept. 30, the average assets under management of advisers who moved also jumped nearly 25% from the previous year, to $402.2 million, according to preliminary data from InvestmentNews' Advisers on the Move database.

The breakdown of Morgan Stanley's reported 3Q adviser exits.

The IN database on adviser movement is not exhaustive, as firms only report a portion of the advisers they recruit and none disclose advisers who leave. Generally speaking, the moves of advisers with small books of businesses are not tracked by the data, and advisers do not necessarily take all of their business to the new firm.

But the data indicate continued recruiting challenges for Morgan Stanley, which completed its acquisition of Citigroup Inc.'s Smith Barney unit earlier this year. Morgan's wealth management division lost a net 11 adviser teams in the third quarter, the most of any firm tracked by IN.

Four of the 10 largest departures from Morgan Stanley in the third quarter were to other wirehouses. Three teams managing $7.9 billion in assets moved to UBS Financial Services Inc., while a $1 billion team in the New York area switched to Wells Fargo Advisors LLC.

Morgan Stanley had 16,321 advisers and $1.8 trillion in assets at the end of the second quarter, according to the company's regulatory filings, making it the largest wirehouse by advisers and the second largest by assets.

“In my case, it was a personal choice,” said Elaina S. Spilove, who oversaw $2.5 billion in assets at Morgan before moving to UBS. “I'd rather be one of 7,000 than one of 17,000; much more hands-on management.”

Christine Jockle, a spokeswoman for Morgan Stanley Wealth Management, said the firm's attrition is at a near-historic lows and average revenue at an all-time high. She said the IN data does not include the number of advisers who joined the firm who did not want to disclose their data publicly. She declined to elaborate on how the firm calculates attrition or to provide an overall number of unreported assets that have come into the firm.

Morgan did add some major advisers last quarter. Robert Finan and Anthony LaFonte, who managed $400 million, left Bank of America Merrill Lynch to join the firm in Red Bank, N.J., and Scott Siegel moved his New York City-based SKOC team, which managed $1.5 billion, from J.P. Morgan Securities LLC.

But high-profile losses, particularly $4.8 billion adviser John F. Rasweiler's moving to UBS in Florham Park, N.J., appeared to offset Morgan's recruitment successes last quarter.

“They are a firm under siege,” said Danny Sarch, an industry recruiter who has been critical of Morgan Stanley. “The smaller, non-wirehouses have preyed on them very successfully.”

Danny Sarch asks where is the next generation of adviser going to come from?

Robert Alpert moved his namesake firm, which includes three other advisers, to a Woodbury, N.Y., branch of Wells Fargo Advisors last week after being affiliated with Morgan Stanley since its 2009 merger with his previous firm, Smith Barney.

He said Morgan's increased fees were a burden for his smaller and intermediate-sized clients.

“We felt that, philosophically, the client was not being put first,” Mr. Alpert said.

In a statement, Ms. Jockle said Morgan Stanley's former advisers, “who always forget to mention the big checks they took to leave,” will put their spin on events.

Morgan Stanley on Oct. 18 will announce its third-quarter earnings, which will give a broader picture of their overall recruitment levels.

Bank of America Merrill Lynch, the nation's largest wirehouse by assets, gained seven large teams last quarter, but the size of the four teams who left the firm in the same quarter caused a net loss of some $555 million in client assets, according to the data.

In one major deal, the $500 million Guth-Fordyce team in New Haven, Conn., left Merrill for Snowden Capital Advisors LLC, a firm launched last year by two former Merrill executives.

Wells Fargo, the third largest brokerage, netted three advisers and $1.5 billion in new assets.

UBS, the smallest of the four wirehouses by assets and advisers, gained $6.8 billion in assets despite adviser head counts remaining stable. Those gains were driven by attracting three big teams from Morgan Stanley: Mr. Rasweiler; Ms. Spilove, in Princeton, N.J., who focuses on institutional clients; and the husband-and-wife duo of Bruce and Bernadette Lanser, who managed $600 million in Milwaukee. The total between those three teams is $7.9 billion.

The strong asset totals are based on a strategic choice by UBS to focus its recruitment efforts on wealthier advisers, an executive from the brokerage said.

“One of the criteria that we look at is that the [financial adviser] has a significant portion of their book in high-net-worth and ultrahigh-net-worth clients,” said Paul Santucci, head of national sales for UBS. “We focus on the best [financial advisers] in their respective marketplaces.”

UBS is the fourth-largest wirehouse by assets and advisers, competing for top advisers with its larger foes, the dominant triumvirate of Morgan Stanley Wealth Management, Bank of America Merrill Lynch and Wells Fargo Advisors.

Many of the larger wirehouses have lost advisers to the independent circuit, but Mr. Santucci said that that trend has not been the case at UBS. He said most of the advisers his firm loses are still to its “historical competition.”

Overall adviser assets moving between firms dropped 8.9% to $20.9 billion, from revised figures in the same period a year ago.

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