October 16, 2012 / 5:11 PM / 5 years ago

Hard times at brokerages spell good times for headhunters

NEW YORK (Reuters) - Veteran brokers are defecting from Wall Street’s biggest banks this year at an unusually high clip, and the turmoil has created a silver lining for one group: headhunters.

Many senior advisers at brokerage arms of major banks say they are considering jumping ship for the first time, frustrated by problems plaguing their parent companies, from credit rating downgrades to staff cutbacks to bothersome technology changes.

Recruiters read about these problems with dollar signs in their eyes, seeing an opportunity to woo high-earning brokers away from big banks to independent brokerages. Even when budgets are tight, brokerages are often willing to pay top dollar for advisers with significant client assets.

So far in 2012, advisers who managed nearly $50 billion in client assets have left top U.S. brokerages Morgan Stanley Wealth Management and Bank of America Merrill Lynch, an already high figure that is expected to grow, industry experts say.

Twelve teams that each managed more than $1 billion in client assets have moved in 2012. In a typical year, fewer than a handful of teams that size switch firms, experts said.

“I‘m placing more million-plus producers,” said Rich Schwarzkopf, who runs his own financial services recruiting firm, Schwarzkopf Recruiting Services, based in New York. “We get paid by how much they produce.”

Brokerages owned by big banks have acknowledged that the problem exists, and they have tried to maintain their head counts by hiring more advisers from their training programs.

A headhunter typically receives 6 percent to 8 percent of a broker’s annual revenue production as commission. That means a broker managing $100 million in client assets, which usually translates to $1 million in annual revenue, brings a $60,000 to $80,000 payout for the recruiter.

Some executive search firms are funding expansion using money earned from moving bigger broker teams. Recruiters are adding staff and office space and buying new equipment or sourcing software, which can cost as much as $200,000 a year, recruiters say. Some headhunters are setting up their own shops.

“You might use that money to break into a different avenue of recruiting,” said California-based financial services recruiter Ron Edde, who opened his own executive search firm, Millennium Career Advisors, this year. He said he always tucks away a portion of his deals into an “emergency fund” in case the good times turn sour.

Better business opportunities have also persuaded some brokers to turn to recruiting themselves.

Mark Albers, a former manager at Morgan Stanley and Merrill Lynch, opened his own executive search firm in February. “I think we have several good years ahead of us where people are going to be evaluating their options,” said Albers, who runs California-based Albers & Associates Consulting, LLC.

“There are those guys who you called maybe 10 years ago on a phone call that went nowhere, who you now have a better chance with,” he said.


Broker recruiters spend much of their time cold calling and often have just a few minutes to make their pitch. They connect with advisers via networking events, referrals, and by buying broker contact information for 25 cents or 50 cents per name.

Recruiters interviewed by Reuters said they typically place between 65 to 80 calls a day. One recruiter estimates he makes 700 calls for every successful deal.

Recruiting a broker who is not already contemplating a move can mean years of regular calls before a switch. Headhunters say brokers are much more receptive when they feel unsettled about circumstances at their current company.

For the better part of a decade, headhunters had tried and failed to sell Tennessee-based adviser Lee Vaughan, a former Merrill Lynch broker, on an opportunity at another firm. It was only in the months before he quit Merrill in February to become an independent adviser with Raymond James that the calls focused on issues facing Bank of America, Vaughan said.

“You want your efforts to be focused where you would get the most immediate and best results,” said Edde.

Schwarzkopf, who was a broker before he became a headhunter, said he hones in on local issues affecting an adviser, such as a branch manager change or a departing assistant, rather than a firm’s big picture problems.

“What you have to find is the unhappy broker,” Schwarzkopf said. The unhappiness is often unique to the individual adviser or his or her branch rather than a company-wide issue, he added.


Lately, the bull‘s-eye is on Morgan Stanley, as frustrations and culture clashes from merging its wealth business with Citigroup’s Smith Barney have surfaced.

A former Morgan Stanley broker who moved to a rival firm last month told Reuters he received as many as four recruiter calls a day if his firm was in the news.

“Whenever the firm you’re at has negative headlines ... the recruiters just start hammering,” said the broker, who asked not to be named because he was not authorized to speak to the press.

Last month, Ameriprise Financial sent letters, signed by the company’s Personal Advisors Group President Don Froude, to some legacy Smith Barney advisers at Morgan Stanley. Recruiters were encouraged to follow up on those pitches, Edde said.

It’s too early to tell how many advisers will respond, but Ameriprise’s head of adviser recruiting, Manish Dave, said such letters have generally been a successful recruiting method.

Ameriprise and other smaller brokerage firms have also lured advisers using the fact that they did not need government bailouts during the 2008 financial crisis.

Large, bank-owned brokerages have capitalized on the misfortune of their competitors to poach advisers, too.

Late last year, when Bank of America’s stock price plunged, UBS Wealth Management Americas offered Merrill advisers signing bonuses that were about 30 percent higher than normal, said financial services recruiter Alan Reed. UBS added at least 24 veteran Merrill Lynch advisers who managed roughly $4.4 billion in client assets.

Many brokers have come to accept that they will receive regular calls and periodic mailings from headhunters.

Longtime Wall Street broker Gil Baumgarten, who generated roughly $1.5 million in annual revenue before leaving UBS in 2010, said he often received five calls a day from recruiters, not including the ones intercepted by his assistant.

Even last month, Baumgarten said he received a letter to his home address from a branch manager at a major U.S. brokerage.

“Headhunters have a product for sale, and that product is change,” said Baumgarten, now an independent adviser. “They view any weakness at any firm as an opportunity for change.”

Reporting By Ashley Lau; Editing by Chelsea Emery, Jennifer Merritt and David Gregorio

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below