Danny Sarch

On Recruiting

Veteran brokerage recruiter Danny Sarch offers his inside, candid point-of-view on the industry in this exclusive InvestmentNews blog.

Jan 16, 2018, 5:47 PM EST

Delay in fiduciary rule does not take any wealth managers off the hook


By Danny Sarch

The DOL fiduciary rule implementation has been delayed. While consumer advocates applauded the new oversight, very few within the wealth management industry felt the regulation was anything but awkward and clunky. Fewer still believe that nonretirement accounts should have a different, lesser standard of care than retirement accounts. The debate brought the fiduciary vs. suitability discussion to a head. Indeed, InvestmentNews has reported that the Securities and Exchange Commission, under Chairman Jay Clayton, is close to a fiduciary standard regulation that would encompass all investment accounts in the wealth management industry, not just the retirement accounts which were affected by the DOL fiduciary rule. Can both brokers and registered investment advisers recognize each other's strengths and weaknesses so that the public gains the benefits of both protection and choice?To the RIAs: While you denigrate the brokerage industry... Read full post

Nov 27, 2017, 5:32 PM EST

UBS broker-protocol exit puts firm before clients

Finger Pointing

By Danny Sarch

Jerry Seinfeld has a routine, a "bit", where he makes fun of fans of professional sports. When a player is part of the team you root for, you cheer him on. When he departs, you scream that he's a bum. In fact, he says, you actually are just rooting for the laundry, not the people. Well, with UBS' exit from the broker protocol, it looks like the wealth management industry is becoming Seinfeldian. According to the UBS and Morgan Stanley announcements, these firms believe that their advisers are the "best" and "world class."The clients of Morgan Stanley and UBS were most likely brought into their respective firms by the efforts of their advisers. The clients were presumably serviced and nurtured in a "world class" way by those same advisers. But the implicit threat in leaving the protocol is that if you choose to "change uniforms" you will be enjoined from talking to those clients again. ADVISER UNIFORMSAnyone else wearing that same "old... Read full post

Oct 31, 2017, 3:13 PM EST

Morgan Stanley is waving the white flag on recruiting


By Danny Sarch

Morgan Stanley announced on Monday that it is leaving the Protocol for Broker Recruiting. This should not surprise anybody who has been paying attention for the last year. Almost exactly a year ago, Morgan Stanley cut its recruiting deals in response to the Department of Labor's FAQ release which prohibited back-end deals in retirement accounts. Then this summer, the firm announced that it was out of recruiting altogether, with a "move by Labor Day weekend or the deal is rescinded" ultimatum that shook the recruiting marketplace.MORGAN'S ANNOUNCEMENTHere is the paragraph from Monday's official press release in its entirety: "The Protocol was instituted in 2004 to limit litigation among member firms by establishing a universal set of rules for Advisors to follow when leaving one Protocol member firm and joining another." "However, over time the Protocol has become replete with opportunities for gamesmanship and loopholes: firms have... Read full post

Sep 11, 2017, 1:55 PM EST

Saying you are a fiduciary does not mean you are a fiduciary


By Danny Sarch

Have you noticed the plethora of recent headlines of bad advisers cheating clients? In case you missed them, here are a few from just the last few weeks: • SEC says RIA stole $1 million from clients, using some of it to support gambling habit• RIA adviser gets two years in prison for cherry-picking trades• Court orders RIA to pay nearly $2 million for defrauding athletes• Los Angeles RIA charged with defrauding athlete and wifeWhat do they have in common? All of the accused advisers were RIAs; that is, they were fiduciaries. More accurately, they were pretending to be fiduciaries in order to more easily cheat their clients. I ask that you try thinking for a moment like a criminal, who sets up a money management, financial advisory, financial planning practice with the true intent of cheating unsuspecting clients out of their money. Would you advertise yourself when you met with your prospects as operating under the... Read full post

May 30, 2017, 3:07 PM EST

As Merrill Lynch and Morgan Stanley cut back, what's next for recruiting deals?


By Danny Sarch

For the adviser seeking a big up front check from a wirehouse, the market just got tougher. In June 2016, Tom Naratil, president of UBS Americas, wrote an op-ed critical of the industry practice of "relentless recruiting." UBS has dramatically slowed its recruiting in the year since. In October 2016, the DOL came out with an FAQ section on its controversial fiduciary rule, which expressly forbids back-end incentives as part of recruiting deals. And in the last two weeks, both Merrill Lynch and Morgan Stanley announced they would also dramatically slow down their own recruiting. Of the four wirehouses, only Wells Fargo has decided to stay in the recruiting business. Wells Fargo plans to increase deals for established advisers in an effort, first, to take advantage of the pause by their peer firms, and, second, to overcome the departures of advisers frustrated by the ongoing disclosures in the Wells Fargo banking scandal.Let's face it:... Read full post

Mar 10, 2017, 3:10 PM EST

The bull market for wirehouse recruiting deals is over. What will happen next?


By Danny Sarch

For years, wirehouse executives privately complained about the high cost of recruiting experienced advisers. Yet the transition packages, commonly called "up-front money," only became more and more lucrative. Shrewd advisers would often play two ardent suitors against each other, squeezing concession after concession from firms desperate to gain assets under management from the top advisers who were willing to move.Back-end incentives, when added on to the front-end inducements, drove the total packages up to 350%, with whispers that even 400% deals were possible for the most attractive candidates. For example, a compliance clean, planning-based, fee-based adviser generating $2 million in production could move to a big firm and receive $8 million. The asterisk attached to this hypothetical transaction is that the adviser would need to meet aggressive asset and production targets in the first few years of employment at the new firm in... Read full post

Dec 2, 2016, 2:58 PM EST

Good branch managers a dying breed

By Danny Sarch

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.... Read full post

Nov 3, 2016, 5:02 PM EST

Frequently asked questions on the DOL fiduciary rule's FAQs

By Danny Sarch

On Thursday, Oct. 27, the Department of Labor released a 24-page document answering 34 frequently asked questions about its new regulation that creates a fiduciary standard for retirement accounts. From the volume of calls I have received since, it appears that perhaps the DOL should issue another FAQ section about its FAQs. I will attempt to fill the void, at least in the sections pertaining to recruiting and compensation:1. Is this headhunter Armageddon? Or, as one adviser asked, does this mean that the deal I always thought would be there for me, and I secretly counted as part of my net worth, is no longer a possibility? FAQ 12 addresses recruiting bonuses, and it makes it clear that “back-end” incentives will not be allowed under the best-interest contract exemption. As of this writing, at least one major firm has apparently, according to numerous reports, reduced its offers to recruits. I believe that more often than ... Read full post

Oct 10, 2016, 4:55 PM EST

How big wealth management firms should treat top-performing advisers to keep them happy

By Danny Sarch

In past columns, I have been critical of the big firms' inability to treat their best performers differently. I have hypothesized that the primary reason why advisers depart the employee model of the big firms to go independent is not financial but because they desire to be free of onerous policies and procedures that do not distinguish the skilled veteran from the neophyte. I received an email which asked: “Okay, Sarch. You are the King of Big Brokerage House Land. How would you treat your best people differently to keep them happy?”Fair question. But first we need a better, more accurate way of defining who those top performers are.(More: We need a new vocabulary in the wealth management industry)Of course, in the wealth management industry, size matters. Advisers are compensated and recognized based on the amount of revenue they generate and their assets under management. For the 30 years I have been recruiting in this... Read full post

Sep 9, 2016, 2:28 PM EST

How to protect yourself from bad clients

By Danny Sarch

As the controversy surrounding the DOL Fiduciary rule swirled this year, Wall Street was made out by regulators to be a predatory monolithic entity that was lurking and waiting to pounce on poor, unsuspecting, nave clients, cheating them out of their hard-earned retirement savings with high commissions. However, if you drive down the I95 South Florida corridor, there are multiple billboards for attorneys who promise that they can recover clients' stock market losses. Take a few seconds and Google “losses in the stock market” and watch the attorney websites roll down your page. There is an established industry that attempts to convince clients that all stock market losses are recoverable via legal action. And since every mere accusation will appear forever on an adviser's BrokerCheck record, it makes sense that advisers should take every precaution to avoid a litigious client.In a perfect world, there would be a... Read full post

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