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Teamwork the Wall Street mantra for wealth management
June 16, 2014 / 5:50 AM / in 3 years

Teamwork the Wall Street mantra for wealth management

NEW YORK (Reuters) - (Fixes pronouns in paragraph 16 to “she” from “he”)

When James Gorman joined Morgan Stanley (MS.N) in 2006 to run its wealth management business, he told brokers in his maiden address that they should work in teams.

It wasn’t great news for the lone wolves who liked to hold their clients close, but it was emblematic of how executives like Gorman were preparing the troops for major shifts in the brokerage sales model.

Brokers who collaborate generate more revenue than sole practitioners, sell a wider array of products and services and - if teams are operating effectively - pay more attention to clients who respond with stronger loyalty to the company, executives say.

Client “stickiness” to a team is especially important since individual brokers who jump to new firms historically bring a high percentage of clients with them. Teaming also slows down overall attrition, because it is much more complex to move a team than a single broker and assistant, recruiters say.

Teaming is one of many trends and issues that top executives of more than two dozen financial services firms will address in interviews with journalists at the Reuters Wealth Management Summit in New York, Geneva and Singapore this week.

The teaming sermon preached eight years ago by Gorman, a former McKinsey & Co. consultant who also ran Merrill Lynch’s army of brokers, is now gospel industrywide. About 67 percent of financial advisers at U.S. brokerage firms, banks and independent advisory shops worked on teams at the end of 2013, according to Cerulli Associates, a Boston consulting firm.

At Morgan Stanley, the world’s biggest retail securities firm, where Gorman is chairman and chief executive, about one-third of the 17,000 brokers work on formal teams and most of the rest use some sort of “strategic partnering,” a spokeswoman said.

At Bank of America (BAC.N) Merrill Lynch -- where Gorman’s boss was Robert McCann, now head of UBS AG’s UBSN.VX big U.S. brokerage arm -- more than half of the firm’s almost 14,000 advisers work on formal teams and almost 75 percent have partnered on sales efforts, a spokeswoman said.

Spokespeople at Wells Fargo Advisors and UBS’s Wealth Management Americas, the two other giants of U.S. brokerage, declined to disclose teaming statistics, but said their executives strongly encourage the practice.


Teaming facilitates big brokerages’ crusade to work solely with wealthy people -- none of the Big Four pays brokers for serving client households that have less than $250,000 in assets at a firm -- and to charge fees tied to the assets held at the firm instead of commissions.

The surest way for brokers to grow assets is to add retirement and business planning, cash management, insurance, banking and estate planning services to their product quiver. And the best way to sell such a complex product array while issuing investment ideas and prospecting for new clients is to work with specialists on teams, the big firms tell brokers.

“It’s not rocket science,” said David Richman, the national director of Eaton Vance Corp’s (EV.N) practice management arm. “The primary reason for teaming is to deliver ... client retention and growth. It is what’s important in a fee-based business.”


Another issue that is becoming more urgent is how to replenish a rapidly shrinking sales force as advisers follow their baby boomer clients into retirement. The average age of brokers and investment advisers in the United States is 51 and more than 42 percent are over 55, according to Cerulli.

Teams are one solution if they can join veterans with the up-and-comers who can learn from them, and allow the younger advisers to inherit clients and build new business with their own generation.

As with all sales philosophies, it is far easier to talk up teaming than to make it work, several people said. The industry is rife with aggressive personalities who don’t easily share and with broken dreams of inter-generational synergy.

“There are many misfit teams,” said Courtney Raymond, a recruiter based in Houston. She said she often sees tension between younger brokers who want to build a big business and older ones who no longer want to make big investments in their practice.

Another recruiter recalled a bitter lawsuit after a team dissolved over the right to work with particular clients.

Firms such as Wells Fargo Advisors, as a result, are designing team agreements addressing issues of breakup and account inheritance.

Even those pacts can be trouble. One group of brokers at the U.S. arm of Royal Bank of Canada’s (RY.TO) RBC Wealth Management division has a multi-year contract to service clients of a colleague who unexpectedly died last year. Their agreement requires them to give income from the deceased partner’s clients to his widow.

“Teams are like a marriage,” says Eaton Vance’s Richmond. “Some work, some never should have started and some fall apart over time.”

(Follow Reuters Summits on Twitter @Reuters_Summits)

Editing by Linda Stern and Leslie Adler

Our Standards:The Thomson Reuters Trust Principles.
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