Sluggish recruiting and the continued slow migration of advisers to smaller firms has left the three biggest wirehouses either adding minimally to the work force or watching the head count drop.
Merrill Lynch Global Wealth Management, a unit of Bank of America Corp., said last Tuesday it had added 361 advisers during the one-year period ended Sept. 30, for a total of 15,340 reps — a modest 2% increase. At Morgan Stanley Smith Barney LLC, the number of brokers at the end of September was 18,119, down 41 brokers from a year earlier.
In the 12-month period ended Sept. 30, Wells Fargo Advisors LLCsaw a drop of 278 advisers. The head count stood at 15,088 at the end of September, company officials said.
And UBS AG, parent of UBS Financial Services Inc., is scheduled to report earnings tomorrow.
Recruiters said the new head count data from Merrill Lynch and MSSB underscore the difficulties that wirehouses are having in bringing in new talent. Amid the flurry of mergers and acquisitions that shook the brokerage industry following the market collapse in 2008, many experienced brokers accepted large bonuses in the form of forgivable loans. Those loans, known as “stay bonuses,” essentially require brokers to stay at their firms for as long as seven to nine years.
Meanwhile, many advisers are fleeing wirehouses for alternative types of securities firms, including boutique investment shops.
In an effort to step up recruiting, some wirehouses are taking steps to revive elaborate training programs that were once the hallmark of many Wall Street brokerages. But those steps are unlikely to yield immediate results, as it takes years to transform a trainee into a full-fledged producer.
Some industry observers and recruiters suspect that any increase in broker head count at a wirehouse comes from trainee brokers — not from snagging experienced reps.
Merrill Lynch historically has grown through training brokers, industry observers noted. “Merrill Lynch seems very interested in organic growth, which historically has been their avenue for growth,” said Rick Peterson, a veteran recruiter. “Other firms, including Morgan Stanley, are looking at that organic, internal avenue of growth as well, since recruiting has dropped off dramatically in 2010.”
“I suspect [the wirehouses are] all counting trainees and other licensed Series 7 [employees] when counting their numbers,” said Danny Sarch, president of Leitner Sarch Consultants Ltd.
Merrill Lynch spokeswoman Selena Morris said the increase in number of reps came from both outside recruits and trainees, but declined to provide more details.
Losing less than 50 reps and advisers over 12 months “is less than meaningless,” a Morgan Stanley spokeswoman, Christine Pollak, wrote in an e-mail.
“The actual story is the stability of our financial adviser force over the past four quarters, and the fact that turnover” of the top 40% of reps remains at historic lows, she wrote. “We continue to recruit high-quality financial advisers and train new entrants into the profession, with an emphasis on placing new trainees with established teams.”
Some industry experts, however, said recruiting has become increasingly difficult for big Wall Street firms.
Eric Gershman, president of Consultants Period Ltd., said wirehouses have seen disappointing results from some of the large teams of advisers they have acquired in recent years. “Firms are spending less time on acquiring reps, and more time on getting brokers to build assets,” he said.
“If advisers move, they'll likely go somewhere that's not the same "big box' firm,” Mr. Gershman said. “The big firms are challenged right now to differentiate themselves.”
Wirehouses are not alone in the arduous battle of recruiting at the moment. Independent and regional broker-dealers, which enjoyed a terrific recruiting season last year, are experiencing a slowdown in recruiting, experts said.
Raymond James & Associates Inc., for example, has seen a falling-off in the number of its brokers and advisers in the United States over the past 12 months. The firm lost 63 brokers in the U.S. from April to the end of September, and it now has 4,729.
That said, Tom James, chairman of Raymond James Financial Inc., is hopeful that things will pick up.
“These [wirehouse] firms always manage to shoot themselves in the foot, in the knee and sometimes higher up,” he said last week in a call with analysts. “They always find ways to encourage their own people to leave. I think that will happen again.”
Brokers are also taking longer to make the decision to change firms, Mr. James said. The improvement in the broad stock market has also boosted advisers' fees, giving them more incentive to stay put, he said.
“We're used to higher rates of financial adviser acquisition,” Mr. James said during the call. “We have big business development efforts, and certainly, all those people would like to see the numbers higher. I think they'll begin to edge up.”
E-mail Bruce Kelly at [email protected].
