Wholesalers: The spies of Wall Street

How much do wholesalers know about advisers? And what are they telling the competition?

Jan 29, 2014 @ 12:01 am

By Mason Braswell

For branch managers not afraid to use them, wholesalers can make good secret agents.

They travel between competitors, become close with managers and financial advisers, and often come across juicy gossip, such as which top-billing teams might be a prime target for a recruiting manager.

“They're good people to get leads from because they know a lot of brokers, and they often have a sense of who might be unhappy,” said Mark Elzweig, a career consultant in the industry who said that he has used wholesalers, who market and distribute investment products to advisers, for recruiting leads in a small number of cases.

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Many branch managers, wholesalers and recruiters attest to having witnessed or benefited from this informal intelligence network on more than one occasion, although the extent of the information sharing is hard to track because most tips are off the record, told in hushed conversations.

Those close to the industry, such as Joe Dolan of the asset management consulting firm Kasina, estimate roughly that as many as 10% or more of wholesalers pass along such tips.

“I would say that in occasions where it happens, the wholesaler is maybe brand new and doesn't know what they should be doing — or their relationship with the branch manager or adviser is very strong,” he said.

In on-the-record conversations, wholesalers and their firms say they frown on the practice, which comes with obvious risks. Wholesalers typically focus on ingratiating themselves into a manager's good graces by providing other kinds of helpful services for an office such as bringing in lunch or speakers, or sponsoring a client seminar.

“It's not as pronounced that the wholesalers are in someone's office and hear an argument and go call a competitor, but the sharing of information obviously goes on,” said Danny Sarch, president of career consulting firm Leitner Sarch Consultants. “It's naïve to think otherwise.”


Matthew McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel Inc., said a good lead can help open doors to the corner office.

“[Wholesalers] are trying to get access to the decision makers in the corner office,” he said. “And it doesn't hurt if you hear that something is going on and you have information people can't get elsewhere.”

The scope of information that is shared varies widely. Most wholesalers admit to being a sounding board for advisers, and many pass along tidbits, such as recommendations about another firm or branch manager.

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“I give them the good bad and the ugly,” said a regional sales director at PNC Financial Group Inc. who asked to remain anonymous because he did not have his firm's permission to speak publicly on the subject. “They have to know going in with their eyes wide open what they're going to be up against.”

PNC spokeswoman Marcey Zwiebel declined to comment about whether the company has rules or structures in place to prevent its wholesalers from trading information.

“We consider this type of information to be inside baseball, and it just is not something we would publicly discuss,” she said.

Although Mary Mock, a regional vice president covering Georgia, North Carolina and South Carolina for Touchstone Securities Inc. is careful to keep adviser information confidential, other wholesalers push the envelope and share riskier details in hopes of getting in the good graces of a manager or adviser.

The PNC wholesaler said that he has passed subtle hints to branch managers, encouraging them to spend more time with an adviser who feels neglected, for example. In other instances, the wholesaler said he has passed along similar information about an adviser to a branch manager at a competitor firm who was looking to make a hire.

“I wouldn't want all the managers to know I'm out there telling people here's a guy that wants to make a move,” the PNC wholesaler said. “But at the end of the day, if he does make a move and it's because I introduced him to the manager, that can be prosperous for myself, as well.”

Wholesalers who share that information, however, can find themselves in dangerous territory.

“It strikes me as a very difficult tightrope they have to walk,” Mr. Sarch said. “Legitimately, you don't want to betray confidences and you don't want to take sides. It's very hard.”

Wholesalers can risk ruining an adviser's relationship with a branch manager or sending branch managers on wild goose chases after teams that may not really be interested in moving.

“It's like matchmaking on a professional level,” Mr. McCormick said. “If you go out and say, 'I think this person likes you,' then as long as there's mutual attraction it works out great. But you have to be very delicate because if you use the wrong word or phrase, it's going to blow up.”


And every branch manager recognizes the obvious implication that their trusted wholesaler could be a double agent.

“Let's say you ask me for information as to who's leaving a firm and I share that with you,” Ms. Mock said. “Then are you foolish enough to think then that I'm only loyal to you would I not do that to you as well?”

“If they're willing to give you some names, chances are they don't have any compunction about doing the same when you're over at Morgan [Stanley] or Merrill [Lynch],” said a branch manager at Stifel Nicolaus & Co. who asked not be identified because he didn't have permission from his compliance department to speak publicly.

Brian Spellecy, a Stifel spokesman, did not return a call seeking comment.

But as the gossip wheel keeps spinning, some will consider it worth the risk.

“This business is way too small to not try to help as many people as you can,” the PNC wholesaler said. “Sometimes you have to walk that tightrope.”


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