The wirehouse model’s hiring constraints were a key factor behind OpenArc Corporate Advisory’s historic breakaway from Merrill Lynch last September, according to managing director Emily Fletcher.
Fletcher, who also is chief operating officer at OpenArc, confirmed to InvestmentNews that the Atlanta-based RIA has made over 20 hires since leaving Merrill in a move that’s been heralded as the largest breakaway in brokerage industry history. OpenArc oversaw $129 billion in assets at Merrill, and claimed to have approximately 146 employees in its Form ADV dated March 27.
“The inability to hire and support your business was one of the reasons we left. We typically have grown around 20% year over year. And if you're not able to support through hiring or even replacement hires to continue that growth, it just puts such a strain on our engine, it slows everything down,” Fletcher told InvestmentNews. “And then you lose good talent because they're working so hard trying to make up for the fact you can't hire.”
Earlier this year, OpenArc hosted its inaugural advisor training program that included several veteran staff members obtaining their advisor licenses. OpenArc’s recent outside hires have spanned advisor support, marketing, and growing its investment team.
“I started at Merrill in the early-90s, so I've got over 30 years of experience in the wirehouse model, and I've just seen it change over the years to become less and less client focused and more about proprietary focus and those kinds of things,” said Fletcher. “And so in that independent space, we really felt we had the opportunity to get back to serving our clients first.”
Fletcher is looking to hire a chief compliance officer to join OpenArc, which has been in litigation with Merrill Lynch since the wirehouse alleged in a lawsuit that Dynasty Financial Partners and custodian Charles Schwab helped spur a “corporate raid” on its advisors and business to form OpenArc Corporate Advisory.
“What I would say to anybody contemplating [a breakaway], follow the rules. Wear the white hat, follow the rules, and we did,” said Fletcher. “Protocol is an accepted industry standard that Merrill actually has led and supported when it first came out years ago, so we are simply following something that they put in place 15 or 20 years ago,” referring to the Broker Protocol established in 2004 to ease advisor transitions between brokerage firms.
OpenArc has been represented in court by Shumaker, Loop & Kendrick, LLP. In October, a federal judge denied Merrill Lynch’s request for a temporary restraining order, and the dispute remains ongoing in arbitration before the Financial Industry Regulatory Authority.
“We're the largest team that's ever done this before, and that's not going to make people happy. And unhappy people do unhappy things sometimes,” added Fletcher.
Dynasty Desktop, Dynasty's business toolkit for independent financial advisors, is being used by OpenArc to anchor its tech stack, integrating platforms including eMoney, Black Diamond, Wealth.com, and Pontera. “We're kind of coming out of the dark ages a little bit with technology. And some of the AI tools that we have the ability to do, the planning software that we have access to, is unbelievable,” said Fletcher.
The majority of the roughly $129 billion in assets OpenArc oversaw at Merrill were institutional assets based around OpenArc’s stock plan and benefits support provided to corporate clients. Fletcher says those corporate assets such as 401(k) and stock plans will take years to transfer, but OpenArc Corporate Advisory has transitioned more than $10 billion and opened over 14,000 accounts in individual client assets since its departure from Merrill Lynch.
“We do have [about] eight plans that have standalone financial wellness, so they've come to us and said even if you don't have the asset yet, we want you to help our employees,” Fletcher said of plan sponsors working with OpenArc’s corporate business. “We have several RFPs that we're in the middle of right now and feel positive about that, but it's going to take a long time to get back to $130 billion.”
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