It has been a very difficult 10 years for branch managers in the wealth management business. While the competition for the consistent revenue of a fee-based financial adviser has created a frenzied recruiting environment and kept compensation costs high, the oversupply of traditional branch managers because of firm consolidations and complexing has driven their compensation lower, if they have been lucky enough to have kept their jobs at all. Of those who lost their jobs, many have successfully rebooted their financial advisor practices, or even started their own firms. Others have left the industry entirely or have resorted to (gasp!) contributing to the oversupply of headhunters in the space.
Among those who have survived the purges are the best in the industry, and they are being given responsibility for more advisers than ever before. The best wealth management branch managers successfully manage “up” and “down.” As the quintessential middle manager, they have to keep their superiors happy by meeting different goals. They have to protect and grow their franchise's profits. Every long-tenured manager proves his ability to manage up just by surviving the myriad reorganizations that every brokerage firm goes through every few years.
The great ones, however, are adding value to their advisers every day. They train, recruit, cajole, encourage, and coach. They remove obstacles, deal with personnel conflicts, and protect their advisers as best they can from the perils and challenges of a large bureaucracy. They do the little things that make a branch happy, like buying fruit and pastries in the mornings, and remembering birthdays. They know which advisers are having marital issues, or parental issues, or real estate issues, all while doing their best to keep them out of compliance's cross hairs. They also know when it makes sense to waive a fee, or to give a preferred margin rate to a client.
The best ones become integral and involved in their communities because their advisers are involved in their communities. They inspire loyalty and trust and create branch cultures that are more unique, distinct, and consistent than the corporate cultures above them. The best of the breed run businesses which generate tens of millions for their companies every year.
One of the reasons that they are excellent at what they do is that they have “sat in the seat”: they were once financial advisers themselves. As one multi-million dollar producer told me: “I've had many managers in my career. Not all of them who used to be brokers were good. But all of them who were good had spent significant time either as an adviser or in other roles within a branch.”
In the next decade, some of the most iconic, well-respected, and talented leaders in this very difficult profession will retire. The pool of new branch managers has typically come from the ranks of the advisers themselves. Since the financial crisis, every adviser is counseled to never give up their books. And we all know the number of advisers is shrinking anyway. Indeed, newly minted non-producing managers at the major firms are likely not to have ever had any experience in their careers as a financial adviser. And as senior leadership has historically also come from the branch system, what are the consequences of corporate leadership and branch managers never having been a financial adviser, the core revenue generating role of its business?
Unfortunately for the current wirehouse advisers, this experiment is happening right now. None of the leaders of the four wirehouses were ever financial advisers (to the best of my knowledge). More than any time in my 30 years as a recruiter, I am told by advisers that they do not believe that management has their best interests at heart. According to my own statistics, this will be the third year in a row that when a wirehouse adviser makes a move, more than 50% of the time he or she is choosing to go to a non-wirehouse alternative.
Leaders at any level who are only managing to survive a few more bonus cycles have little motivation to care about the long-term prospects of their core business. Senior leaders who are decades removed from ever having told a client that they lost money, or have never experienced the joy of being a trusted adviser to a client's family over generations, are more likely to make decisions that only make their advisers more cynical. Cynical advisers become disenchanted with leadership that does not understand them. And disenchanted advisers leave.
Danny Sarch is the founder and owner of Leitner Sarch Consultants, a wealth management recruiting firm based in White Plains, N.Y.