The five-person business, with about $520 million in assets, is setting up shop as an independent in Novi, Mich.
A veteran Michigan-based brokerage team at Merrill Lynch & Co. Inc. that produces $2.7 million in fees and commissions has bolted to Raymond James & Associates Inc., saying its clients are concerned about the financial stability of Merrill.
Charles L. Nemes, who has worked at Merrill for 21 years, Tim Rush, a 19-year Merrill veteran, and three associates plan to open a new Raymond James office in Novi, Mich., in two weeks. The group oversees about $520 million of assets for about 250 clients, Nemes said, and generated more than $3.75 million of annual revenue for Merrill.
Mr. Nemes, 51, said Merrill’s financial woes were a direct cause of his group’s decision to leave.
“Some clients who’ve been with us for a number of years were asking if their assets were safe,” he said, referring to five consecutive quarters in which New York-based Merrill accumulated $23.8 billion in losses. “As one client put it, ‘How can we feel comfortable that our money is being managed responsibly when the firm we’re putting the money with can’t manage its own finances?’ They shouldn’t have to go through that kind of stress.”
Merrill, the world’s biggest brokerage firm with more than 16,000 financial advisers, said in September it would sell itself to Charlotte, N.C.-based Bank of America Corp. in an effort to strengthen a balance sheet hobbled by billions of dollars of bad mortgage-related assets.
A Merrill spokeswoman declined to comment on the brokers' departure.
Earlier Wednesday, a team of Merrill brokers in Westport, Conn., with about $900 million of client assets confirmed they have broken off and set up an independent advisory firm, LLBH Group Private Wealth Management, named for its principals William Lomus, William Loftus, Kevin Burns and Jim Pratt-Heaney.
Although many observers have been expecting a rush of brokers in Merrill’s profitable wealth management businesses to defect, retention to date has been relatively solid as brokers wait to see what kind of packages they may be offered to remain.
"I haven’t seen anybody leave yet, but I know of a lot of people who are shopping," said Alan Reed, a vice president at Michael King Associates, a broker recruiting firm in New York City.
To be sure, it hasn't been all outflow at a firm as large as Merrill. Earlier this month a three-person team of Morgan Stanley financial advisers -- Carl Choy, Lynne Kinney and Ronald Wo with about $4.7 million of production and $953 million of client assets -- joined Merrill in Honolulu, Hawaii, the Merrill spokeswoman said. (Morgan Stanley, for its part, picked up the father-and-son team of Mitchell and Christopher Rask in Lake Oswego, Ore., which with an associate produced $1.4 million in the past year and had $118 million of assets under management. The same Oregon office, whose branch manager is a Merrill alumnus, lured three other Merrill brokers with combined production of $1.3 million recently.)
Some Merrill brokers are concerned that their firm will be constrained from offering deals that are too fat at a time when its shareholders are hurting and when Bank of America has decided to accept a $25 billion investment from the U.S. government to shore up its balance sheet.
Mr. Nemes, who said he was in Merrill’s top broker recognition club for about 15 years, began looking for a new home last February as the extent of Merrill’s losses were becoming evident. The group traveled three times to Raymond James’s St. Petersburg, Fla.-based headquarters to do due diligence, meeting with top executives who included Raymond James Financial Inc. Chairman and Chief Executive Tom James.
Raymond James is paying the team a small upfront bonus, but the team’s chief motivation for picking the firm was its record of conservative management that has allowed the Florida-based firm to avoid the subprime-mortgage and credit disasters that have wounded so many financial firms, Mr. Nemes said. Raymond James also opened a new standalone office for the Michigan brokers just half a mile from their old Merrill haunts.
“We are not going because of the paycheck,’’ Mr. Nemes said, noting that they received “less than half of what we could have gotten somewhere else.”
He said he’s been hearing from many Merrill brokers who are considering exits. “That place is very sullen right now,’’ he said.
