| NEW YORK
NEW YORK Jan 7 U.S. brokerages saw top advisers
depart in droves last year and shift $132.5 billion in client
assets with them, a Reuters tally shows, creating headaches for
some Wall Street banks at a time when wealth management is
becoming an increasingly important part of business.
Unprecedented signing bonuses, cultural changes linked to
acquisitions, a push to cross-sell company products, and a
growing charm of joining regional outfits contributed to many of
these exits which are likely to continue this year, recruiters
and brokers said.
All told, at least 880 veteran brokers and their teams
changed firms in 2012, according to the data, which tracks the
moves of top individual advisers and teams that manage $100
million or more in client assets. That included the departure of
at least 16 $1 billion-plus advisers or teams, a number wealth
management recruiters say they usually see over several years,
not in 12 months.
Morgan Stanley Wealth Management - the brokerage majority
owned by Morgan Stanley and partially owned by Citigroup
- felt the brunt of defections in 2012, with the departure
of at least 243 veteran advisers who managed more than $39.2
billion. Bank of America Corp's Merrill lost at least
184 advisers who managed more than $28.5 billion.
The two largest U.S. brokerages by headcount each lost at
least six teams that managed $1 billion or more in client assets
apiece - easily the size of an entire office branch.
"Our strategy is to attract the industry's best talent for
our clients, and to size our adviser population to meet market
opportunity," Merrill spokesman Matt Card said.
Morgan Stanley declined to comment.
Several major Wall Street banks such as Morgan Stanley and
UBS AG are betting on wealth management for
steady income and growth, as a weak global economy and financial
regulation hit profits from other businesses such as trading and
investment banking. At Morgan Stanley, for example, the wealth
management unit accounted for 44 percent of third-quarter
revenue, excluding one-time charges.
While adviser defections may not immediately make a big
dent in the more than $1 trillion in assets the top brokerages
manage, the losses can add up over time. Losing $1 billion in
client assets, for example, can translate into loss of more than
$10 million in annual revenues for a firm.
"We'll start to see some impact on the revenue side of the
equation," as bigger advisers continue to depart, said
Memphis-based banking analyst Marty Mosby of Guggenheim
"(Bigger firms) will have to make sure their resources are
being applied in the most efficient way possible," and will need
to make existing client assets more productive, he said.
U.S. brokerages have already begun to move in that
direction, adding incentives to their 2013 pay plans to coax
advisers to sell bank products.
Wells Fargo & Co's Wells Fargo Advisors and UBS
Wealth Management Americas fared better in terms of recruiting
and retaining veteran advisers in 2012. UBS offered some of the
richest retention and sign-on bonuses in the industry and Wells
benefited from its independent brokerage division, which allows
advisers to own their practices. Even so, at least 82 veteran
advisers departed Wells and 67 left UBS.
UBS is "always looking at attracting the top advisers,"
while also making the firm a place advisers want to stay,
spokeswoman Karina Byrne said. "Our low attrition rates show
that we are succeeding."
Wells managing director Ron Sallett said 2012 was the second
best recruiting year for the company's independent brokerage
unit since it was founded more than a decade ago. "We think our
firm is continuing to position itself in the market as the firm
of choice," he said.
Signing bonuses for top advisers are now around 350 percent
of the broker's annual revenue, with 180 to 200 percent offered
upfront, said Tom Lewis, a New Jersey-based lawyer for Stark &
Stark. An adviser who generates about $1 million in annual
revenue might receive as much as $2 million on day one from a
"They're in a range that we haven't seen approached
before," said Lewis, who works with advisers making the
transition to a new firm. "It's a long-term investment, yet your
short-term profitability suffers."
UBS, for example, said it had a 10 percent increase in
compensation commitments and advances related to recruited
financial advisers in the third quarter from the year prior. The
cost-to-income ratio - a measure of profitability - at UBS's
U.S. brokerage was at 86.1 percent at the end of September,
compared with 66.5 percent for its global wealth management
unit, which doesn't have to offer such bonuses.
Half of the big brokerage advisers who left their firms
became independent advisers, joined an independent advisory firm
or moved to a smaller firm like Raymond James Financial Inc
or Ameriprise Financial Inc, the data shows.
They took $35.2 billion in client assets with them.
"Our expectations for 2013 (recruiting) are very promising,"
said Raymond James' Private Client Group President Tash Elwyn.
These firms offer lower signing bonuses, but advisers who
made the move say there are other attractions, such as the
ability to focus more on their clients' investment needs rather
than also worrying about the company's bottom line.
Departing wirehouse advisers also pointed to concerns about
a perceived push to cross-sell bank or company-branded products
at their old firms, increased layers of management and cultural
conflicts stemming from the acquisition of their firm by larger
Illinois-based advisers Ziv Ohel and William Duncan, who
together managed $275 million in client assets at Morgan
Stanley, left the firm in mid-November. Ohel said they joined
Minneapolis-based Ameriprise because the firm focused more on
financial planning and had less of a big brokerage mentality.
Independence is also increasingly attractive to advisers.
HighTower Advisors LLC, Focus Financial Partners LLC and Dynasty
Financial Partners LLC each lured at least one team with $1
billion or more in client assets.