Advisers on the Move

Stifel, First Republic post top recruiting gains in Q3, as wirehouses continue to lose brokers

Overall, broker and adviser movement slowed during the quarter, with 101 teams shifting firms compared to 124 at this time last year

Oct 23, 2018 @ 2:09 pm

By Bruce Kelly

Two distinctly different firms posted the strongest gains of advisers during the third quarter, with registered reps and financial advisers continuing to leave large Wall Street firms.

Stifel Nicolaus & Co. Inc., a retail wealth management shop, recruited 33 advisers with roughly $3.6 billion in assets for the three months that ended in September, while First Republic Securities, the private client group of a bank, recruited two advisers with $2.65 billion in client assets, according to InvestmentNews data.

And the wirehouses continued to see reps and financial advisers leave their ranks in large numbers. The four wirehouses — Merrill Lynch, Morgan Stanley, Wells Fargo Advisors and UBS Financial Services Inc. — do not typically publicly report the number of advisers joining their ranks, so getting a clear picture of their gains and losses over a specific period is difficult.

However, advisers continue to leave the wirehouses, with Wells Fargo Advisors and UBS seeing the largest numbers of advisers move to other firms in the third quarter. According to InvestmentNews data, Wells Fargo Advisors, which has been hard hit due to persistent banking scandals, lost 38 advisers during the quarter and gained two, for a net loss of assets controlled by advisers of almost $6.7 billion. UBS lost 10 advisers who controlled $3.9 billion in client assets.

(More: See all the latest moves in the InvestmentNews Advisers on the Move database)

Overall, recruiting and broker movement slowed during the quarter, with 101 teams moving to new firms compared to 124 during the same quarter in 2017, a decrease of 18.5%. Last fall, Morgan Stanley and UBS withdrew from the Protocol for Broker Recruiting, the industry agreement that permits advisers to contact former clients when moving to another protocol firm.

The four wirehouses continue to get their fair share of recruits from each other, but regional and independent broker-dealers have been making considerable inroads in recruiting wirehouse brokers, often the most experienced and productive in the industry. They have caught up in technology, and the large firms have pulled back from paying over the top, expensive bonuses for big recruits.

A spokesperson for Wells Fargo Advisors, Shea Leordeanu, said that last month was the firm's best for recruiting in three years, with the firm adding "a lot more than two" advisers. Its strategy is to recruit experienced advisers and train new financial advisers, she said.

A source close to UBS said the advisers leaving are typically lower producers. From July to September, UBS recruited 11 advisers with $460 million in client assets, and this month the firm hired a team in Ohio with close to $500 million in client assets, according to the source.

"We're having a really good recruiting year, with $14.4 billion in adviser assets for the year to date," said John Pierce, head of recruiting at Stifel. "We have never been or will be the high payer on the street. Our recruiting deals depend on the adviser."

He said an adviser who produces $1 million in fees and commissions could expect a recruiting bonus, in the form of a forgivable loan of 1.5 times to 2 times his or her prior 12 months of revenues, but Stifel's payout of 50% boosts an adviser's ability to pay back that loan.

"Our grid is the highest at every production level, so that's important," he said. "There's no nickel and diming here. And it makes a true difference over the years in payment of note," he said, adding that the largest number of recruits in 2018 moving to Stifel are from Wells Fargo Advisors.

And First Republic continues to build its wealth management business, targeting wirehouse advisers.

During the quarter, Steve Levine, a former UBS adviser based in Los Angeles with $2 billion in client assets, moved his practice to First Republic.

"We are continuing to invest meaningfully in the franchise," said Mike Roffler, executive vice president and chief financial officer of First Republic Bank, on a call this month to discuss earnings with analysts. "We hired a couple of wealth management teams and the prior teams are doing a great job of bringing over their clients and building their book of business. I think we're very focused on continued investment in the franchise, but also be sort of very disciplined and methodical about it."

Year-over-year for the quarter ending in September, wealth management assets at First Republic increased 29% and totaled $131 billion, the company reported.

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