E-Mail this Article

Wirehouses warm to bank channel recruits

Apr 29, 2014 @ 12:01 am

By Mason Braswell

Wirehouses, bank brokers, banks, Wells Fargo, Morgan Stanley, UBS, Merrill Lynch
+ Zoom

In the heated competition to bring on new client assets, some of the wirehouses are broadening their search to include bank advisers, a group once thought of as not worth their effort, according to recruiters and branch managers.

"The major firms have become much more flexible and open as to where they will recruit advisers from," said Mindy Diamond, president of career consulting firm Diamond Consultants. "Because the landscape has become more competitive, the big firms need to fish in other ponds in order to ensure success and meet their aggressive recruiting goals."

Many wirehouse managers have been taking more meetings with advisers from firms such as PNC Bank NA, JPMorgan Chase & Co. or BB&T Corp. in the past two years. The deals for bank channel advisers have also grown to rival some of the large multiples offered to veteran wirehouse producers as the big brokerages look to tap new sources of client assets, despite some major legal and logistical recruiting roadblocks.

Consulting firms such as Cerulli Associates Inc. and Meridian-IQ said they do not have data on the number of advisers moving from the bank channel to wirehouses, and most of the moves are not publicized because the assets controlled by the advisers are typically modest. But anecdotal evidence and interviews with consultants and recruiters show that wirehouses are looking at the channel in a new light as a source of recruits beyond poaching from other wirehouses.

"There's no question they're digging deeper," said Andrew Parish, a career consultant with AdvisorHub Inc. He said wirehouses are finding that recruiting each other's brokers is becoming less and less profitable.

Wirehouses have pulled selectively from the bank channel in the past, but the firms have largely been hesitant to pay big money because advisers at banks bring additional risk.

"Those advisers are known as a crapshoot for recruiting," said Danny Sarch, president of career consulting firm Leitner Sarch Consultants.

Most bank advisers build their businesses through company referrals rather than prospecting, so the clients are less willing to transfer their assets, according to Rick Rummage, who places advisers through his firm, The Rummage Group.

"Over the years they have had a bad rap because every wirehouse manager has hired a bad bank adviser who only brought over 10% or 20% of assets," he said. "The truth is, they shouldn't paint all bank-based advisers with that brush."

But Mr. Rummage said he was aware of one deal in which Morgan Stanley offered a BB&T adviser who had brought in approximately $350,000 in revenue over the last 12 months a signing loan of 130% upfront.

That's close to the deals veteran wirehouse advisers with around $1 million in production typically get.

The size of the deal is more surprising since bank advisers pose legal risks. While most brokerage firms have signed the Protocol for Broker Recruiting — an agreement between firms that allows departing brokers to take a limited amount of client information without being sued — banks have shied away.

Bank of America Merrill Lynch is a member of the protocol, for example, but that does not apply to advisers in its bank channel, Merrill Edge. J.P. Morgan Securities signed on earlier this year, but clarified that it was limited only to the few hundred advisers in its private client group and excluded the JPMorgan Chase Private Bank.

Earlier this year, Morgan Stanley was sued in federal court when it recruited a trust adviser, Eileen Daly, from PNC Bank. PNC accused the firm of helping Ms. Daly steal trade secrets because she attempted to take client information with her when she moved.

"These advisers are connected with employment contracts that have nonsolicits or noncompetes, or even sometimes a garden leave [a period when they cannot work but remain on the payroll] of 30, 60 or 90 days," said Mr. Parish. "Not only are they not protocol, but the transitions have to be handled in a very different way."

In addition to tighter restrictions on what client information can be taken, former bank advisers may have to send out a greeting card announcing the move and then wait for a client to call back rather than reaching out first, Mr. Parish said.

Firms also structure deals with bank advisers differently, so that most of the transition money is contingent on what percentage of the adviser's book of business moves over, Ms. Diamond said.

Another holdup is that many bank advisers are working with mass-affluent clients with less than $250,000 in assets and most wirehouse accounts require investible assets of greater than $250,000 for the adviser to receive a payout.

Still, wirehouse managers are willing to take on the risk, especially if a successful bank hire can provide a connection to a big-name client. Ms. Daly provided trust advisory services to "a number of PNC's most valuable customers, including one of its largest customers in the state of Florida," PNC's lawsuit alleged.

"I don't know that there's a renewed interest," said a Stifel Financial Corp. branch manager who was formerly with Wells Fargo Advisors, who spoke on condition of anonymity because he did not have approval to speak publicly about the matter. "But there's maybe more awareness that some of these guys are good brokers who just happen to be working with a bank."

A Wells Fargo spokeswoman, Rachelle Rowe, was unable to provide numbers, but said the firm makes it easy for advisers to move between business units internally. A Morgan Stanley spokeswoman, Christine Jockle, declined to comment. A spokesman for UBS Wealth Management Americas, Gregg Rosenberg, also declined to comment.

Merrill Lynch spokeswoman Susan Atran said the firm did not have numbers that it could disclose on bank channel recruits.

The firm has recently started placing Merrill Lynch trainees in Bank of America branches, however, because they want advisers who have a better understanding of banking products and services.

Your Compensation

Does your pay stack up?

InvestmentNews' National Adviser Compensation Database provides detailed, regional compensation information on more than 20 different positions within a financial advisory firm.

Compensation & Staffing Study

Is your firm paying competitive compensation and employee benefits? Find out now by ordering the 2013 Compensation & Staffing Study.

Upcoming Event

Sep 10

Webcast

How to build 'real-life' retirement income portfolios

As your clients approach retirement, that nest egg, which you have been carefully protecting, needs to begin to hatch.When they reach 65, the ideals of "beating benchmarks" and "taking a long-term perspective" are suddenly replaced with the... Learn more

Accepted by the CFP Board for 1 CE credit and by IMCA for 1 CIMA®/CIMC®/CPWA® CE credit.

Get Daily News & Intel

Breaking news and in-depth coverage of essential topics delivered straight to your inbox.



The information entered on this page will not be used to send unsolicited e-mail, and will not be sold to a 3rd party.

REMINDER: This service is for personal use only. For commercial reprints, Web links and e-mailings please contact our Reprint Sales Manager at (732) 723-0569.

X

Subscribe and SAVE over 72%

View our best offer
Subscribe to Print