Fifteen advisers, including most recently a team in Texas managing $750 million in assets, have fled Barclays Plc U.S. wealth management group in the last month to join Bank of America Merrill Lynch following the announcement that Barclays unit was being acquired by the lesser known Stifel Financial Corp.
Recruiters said the flight to Merrill is a testament to the challenges Stifel faces as it tries to hold onto the rest of Barclays' brokers and make inroads into the highly competitive market for ultra-wealthy clients.
With the addition of the team in Texas, Merrill Lynch has picked up close to 10% of the approximately 180 advisers who were at Barclays at the time the deal with Stifel was announced on June 8. The group, which includes three advisers, managed approximately $250 million per adviser, well above the average of $189 million per adviser for the Barclays unit.
“Those are the cherries that they want to have,” said Howard Diamond, a managing director at Diamond Consultants, a placement firm for financial advisers. “When the Stifel deal was announced, advisers weighed the retention package that they'd get from Stifel against a huge upfront package they'd get from Merrill Lynch, so if they're going to go to a different firm, they might as well go where they want and be paid a lot more money.”
BONUSES COULD TOP 300% OF REVENUE
Mr. Diamond estimated that Merrill Lynch could have offered over 300% of the advisers' annual revenue in the form of up-front and back-end bonuses tied to performance goals. Stifel's retention deal has generally been around 150% for advisers, Mr. Diamond and other recruiters said. Other firms are also competing for Barclays advisers, including Morgan Stanley Wealth Management, Wells Fargo Advisors and Raymond James & Associates, Mr. Diamond said.
A spokeswoman for Bank of America Merrill Lynch, Susan Atran, said the firm did not discuss specific numbers. Brian Spellecy, a spokesman for Stifel, declined to comment.
For Stifel, the Barclays acquisition represents an important moment as it could help the once-regional firm secure a foothold in the ultra-high net worth channel, analysts said.
Stifel advisers manage approximately $89 million on average, compared with the $189 million per adviser at Barclays and $159 million at Merrill Lynch, according to a report from Credit Suisse analyst Christian Bolu.
Stifel has been quietly expanding its reach into the ultra-wealthy market recently since adding one of the founders of Merrill's private banking and investment group, Michael Sullivan, in December 2013. The firm last year also picked up a pair of former Merrill Lynch private bankers in Rochester, N.Y. who managed $2.5 billion in assets before they were let go from Merrill.
But the Barclays addition could be complicated by a number of factors, including Stifel's more regional brand and whether or not the firm can service some of the Barclays advisers' more complicated businesses. That would include alternative investments, syndicate business and equity underwriting products, Mr. Bolu said in the report. Roughly 40% of the revenue produced by Barclays brokers came from alternatives and syndicate business, according to Mr. Bolu, which was based on an analysis of filings from Lehman Brothers Holdings Inc. and press reports.
“This could mean significant revenue attrition post-merger as we do not believe Stifel has the depth of underwriting and alternatives capabilities of Barclays,” Mr. Bolu said.
It is not clear whether these were concerns of the team in Texas. The advisers were not available for comment, according to Ms. Atran.
The three, including Barry Schneider, Cris Bera and Chris Dewhurst, joined Merrill's Private Banking and Investment Group, a division of around 150 teams focused almost exclusively on clients with around $10 million or more in assets. They said in a news release that they had a number of high net worth and institutional clients and joined Merrill because of the “broad range of capabilities.”
'PANACHE' OF THE NAME
Ron Edde, who places financial advisers through his firm Millennium Career Advisors, said that another factor for a large team that he is working with on the West Coast is how clients will respond to the Stifel name.
“I think a lot of people who are with Barclays were there because of the panache that the name carried,” Mr. Edde said. “While Stifel is a good firm, it's not exactly a household name if you walk down the street and ask 100 people.”
Still, the number of defections will not hurt Stifel financially. The deal was valued at around $150 million to $250 million, but Stifel will only pay for the assets that they retain, recruiters said.
Mr. Diamond said that despite the most recent move to Merrill, a lot of advisers were happy with Stifel. Most of those who are moving now were those who were already planning on going somewhere else before the deal, he said.
“Stifel is a good firm, and many Barclays advisers are going to be very happy there,” Mr. Diamond said. “They like the regional name. They like being paid 150% and being able to stay put.”
He estimated that if Stifel can manage to hang onto around 70% of the advisers that they want to retain from Barclays, then they would have gotten a good deal.
“That would be a great win for Stifel,” he said.