In my opinion, no article published in the wealth management industry trade press in the last month has garnered as much attention as the Feb. 23 piece in InvestmentNews, written by Christine Idzelis, titled “Merrill Lynch keeps a tight grip on clients."
In it, a Merrill Lynch spokesman claims that in the last three to five years, Merrill Lynch has retained 40%-50% of client assets during the first year following a Merrill Lynch adviser's departure.
I was quoted in the article and have been asked about it numerous times by both Merrill Lynch advisers and their competitors. Competitors are wondering whether a given Merrill Lynch adviser they are recruiting will be able to deliver his or her business. And the Merrill Lynch advisers are wondering whether their business will transition. Of course, Merrill Lynch has a vested interest in both trying to retain the clients from advisers who already have departed and in scaring advisers who might be considering a departure in the future.
So what is the truth?
First, let me just get the famous wealth management hypocrisy out of the way. That is, when you talk to any firm, nobody has ever recruited someone bad or lost someone good. Every departing adviser has a “problem” or was “forced to leave for money reasons,” while every hired adviser is a “difference maker” or “game changer” (fill in your own favorite sports analogy). With that hypocrisy acknowledged, I want to look at some of the real facts behind the article.
Considering Merrill Lynch must have the names of all of their departed advisers and can track the assets, why was their statistic a broad range of 40%-50%? And why was the range three to five years? Surely a defined number of departed advisers can be applied to a finite time frame. From there, could Merrill not provide a precise calculation of the assets that were retained?
I also examined the InvestmentNews Advisers on the Move database. This database, while useful, is incomplete. The moves listed are only the ones reported in the trade press. Some advisers choose not to have their new firm publicize the transaction. In addition, smaller moves are not reported with the same consistency as larger ones. That said, for the 12 months ended March 13, 2016, the database shows that 35 teams departed Merrill Lynch (90 advisers in total).
If Merrill Lynch's statistics were 100% accurate, as a professional headhunter, I would expect either a diminished appetite for Merrill Lynch advisers or that Merrill Lynch advisers would command a reduced deal in the marketplace. Neither of these things is true.
Examination of the InvestmentNews database also shows that virtually all of the firms that have successfully recruited from Merrill Lynch over the past year are “repeat shoppers” in the Merrill Lynch showroom. If hiring Merrill advisers resulted in only half of their business transitioning, surely some of their competitors would be scared to repeat the mistake. Demand for Merrill Lynch advisers would be diminished. My own experience tells me that Merrill Lynch advisers continue to explore opportunities outside the organization, and there has been no decrease in suitors looking to hire them.
Are departing Merrill Lynch advisers failing to take some accounts? Absolutely. Certainly, they cannot take clients with them who are Bank of America employees. Also, departing advisers use their transition as an opportunity to prune their book of unwanted clients. In my experience, Merrill Lynch advisers successfully move 90% of what they want to take and experience surprises that are both positive and negative.
Finally, virtually every Merrill Lynch adviser I have worked with over the past 30 years makes sure to consult other advisers who have moved in the past. Those conversations are usually very candid and include the challenges, successes and failures.
If the experience is as bad as Merrill Lynch claims, why are Merrill Lynch advisers still moving, and why are Merrill Lynch's competitors still hiring them? As a group, Merrill Lynch advisers are skilled practitioners who take their professional responsibility very seriously. But they move, and firms hire them, because their clients are more loyal to the individual adviser than they are to the firm, and because they successfully transition their clients to their new firm.
Danny Sarch is the founder and owner of Leitner Sarch Consultants, a wealth management recruiting firm based in White Plains, N.Y.