Rockefeller Lands ATL Whale; Morgan Stanley Team Moves $2B Practice To Fast Rising Firm

Rockefeller was a net winner in recruiting and brand reputation in 2019. Drama free and very selective with their hires (money center cities, large AUM base, annual revenue of scale), Rockefeller pushed into the spotlight throughout most of last year.

That has continued in 2020 as they’ve already started with a huge hire – stealing away on of the biggest teams in all of Atlanta, via a recruiting source on Friday:

“Rockefeller Capital acquires The Merlin Wealth Management team from Morgan Stanley in Atlanta. Michael Merlin leaves Morgan after 10 years with over a decade spent at Citigroup prior to joining Morgan. The team’s production was approximately $8 million, managing approximately $2 billion in assets. This is yet another great acquisition for Rockefeller Capital.”
Rockefeller put together several deals like this in 2019 and has made it a clear and central part of their business plan moving forward. It is reminiscent of the early days of HighTower, albeit with a more clear cut and traditional grid and employee based acquisition structure. Still, the similarities are out there.The Merlin Wealth Management Group declined to comment on their transition, but via recruiting contacts familiar with the firm they were “run down by the bureaucracy of Morgan Stanley and its ever growing complexity and lack of responsiveness to team needs, juxtaposed against the protocol exit.”

That response and feedback doesn’t surprise – and could be mapped over just about any exit from a traditional wirehouse these days. Teams want deeper – whether legally real or perceived – control of their practice on a daily and long term basis. The scale and exclusivity of Rockefeller seems to give the folks at the Merlin Group just that… so they hit the bid.

As a bit of a  teaser, we expect several more of these high level announcements to be coming from Rockefeller over the next several weeks. Stay tuned.

“Get the fu** outta here with ‘reverse churning’…”

The entire concept of reverse churning continues to be a head scratcher for us. To quickly recap, first commission based accounts were bad (just ask Tom Buck) but now fee-based accounts are also considered bad and are being taken to the legal woodshed. Give us a second so that are heads can stop spinning.
A well-known ‘reverse churning’ lawsuit was dismissed last month on behalf of plaintiff lawyers claiming that customers at Edward Jones were forced into fee-based accounts when they were perfectly happy in their commission based ones. Thus the term ‘reverse churning’; as the fees associated with the new wrap accounts outpaced the commissions generated on the same accounts on an annual basis.
Per reports:
“Customers accusing Edward D. Jones & Co. of generating hundreds of millions of dollars in a “reverse churning” scheme have refiled their complaint, following dismissal of their putative class-action lawsuit by a federal judge last month.

“The core argument that Jones shifted clients to fee-based accounts that are more costly than traditional brokerage accounts remains, but the refiled complaint has been modified to overcome Eastern District of California federal judge John Mendez’ objections on the law, said Ivy T. Ngo, one of the lead counsels for the plaintiffs.”

“Lawyers eliminated several Jones executives and asset management units as defendants, added allegations from former advisors about inadequate suitability assessments and changed the focus of the charges to the firm’s breach of fiduciary duty, she said.”

One Morgan Stanley advisor said it best: “Get the fuck outta here with reverse churning. These compliance and regulatory fucks are doing whatever they can to justify their existence. Pure comedy.”

So the lawsuit lives and plaintiff attorneys are going to give it a second go. The nonsense of reverse churning lives and breathes and we will continue to talk about it for months to come. Strange happenings in the delta that brings together wealth management and the legal field. Strange indeed.

Stupid Is As Stupid Does: Genius Broker Censured For Mineral Rights Scam

It always baffles us why advisors make some of the decisions they make. Trying to figure out why a short term cash infusion is worth flushing your career dow the toilet.
That’s what a Wells Fargo advisor did a few weeks ago, and ended up receiving a nine month bar from the industry.

“David Manor helped an elderly customer sell mineral rights on his property, accepted more than one-third of the $300,000 proceeds as a “gift” and convinced the client to open an outside brokerage account at Charles Schwab that lost $224,837 in less than three months from options trades that Manor executed by using the client’s login, according to a settlement order issued by Finra on Monday.”“The broker hid the activities from Wells and made unsuitable trades, thereby violating six Finra rules, the order said.

The customer, who was 75 when he opened his Wells account in October 2016, shortly before the alleged activities occurred, wrote a check for $100,000 to Manor’s wife with the word “gift” in the memo line, it said.

Manor used his personal e-mail to discuss the mineral rights sale in order to avoid detection by Wells, discouraged the customer from using the proceeds to add to two variable annuities he owned and filled out Schwab forms indicating that his customer who had never traded options was experienced in the instruments.

Stupidity + Greed = Suspension.

A censure and 9 month suspension seems a bit light. Elder abuse is and should remain a focus on FINRA’s efforts and resources.

Again, what we can’t understand is why 100k is worth destroying your career for like this?

UBS Brass Balls: New Boss Set To Cut Management Layers And ‘Monitor’ Client Interactions

Well, that’s going to leave a mark. In a fairly innocuous article late last week, newly minted and incoming UBS Wealth Management boss, Iqbal Khan, made it clear that a full third of management positions in the wealth division are set to get smoked. Ouch.

If that wasn’t enough to get your attention, then this quote should have:

“In the memo, the executives said client interaction remains at the heart of the bank’s offering, and that from this year, UBS will use new tools to track the time its staff spend with clients, to encourage better service.


So we took to the phones yesterday and talked to several different managers at the firm to get a pulse of what they expect to happen now, and throughout 2020.

A manager in California responded this way, “Khan is known for this, so if anyone expected any different, they aren’t playing the game right. Just like unhappy advisors are aware of other firms, if not genuinely engaged in ongoing due diligence, so should managers at this firm be. If you are asking about the overall climate right now – the ‘tools to track’ is having the most impact. Everyone is concerned about that one.”

A manager in Florida said this about the ‘tools to track’, “that is chilling. Look, we get that the firm is tracking just about everything that happens on your desktop… my question is what comes next? Gives you an idea why Merrill is about to issue company wide phones. For just the reason above. That moves this question beyond key strokes, but now into geo-location, voice, text. Not good.”

A regional director in NYC added, “the management cuts – nothing new and has been happening bite by bite for a decade – so survival of the fittest. The tracking of client interactions has everyone on edge, but I guess if you have nothing to hide you either don’t give a fuck, or it bothers you from a legitimate privacy standpoint. What other data and info will they come across at the same time that they are monitoring ‘client interactions’.”

Some management cuts at the firm have already started, with a guy like Pete Kaldis, in Ohio catching an axe before the holidays via restructuring in the Midwest. More reductions like that will cross the wires throughout the first and second quarters of 2020.

Given the announcements out of the firm in the past few months (grid debacle, expense cuts, management cuts, protocol exit, now client interaction tracking), it feels like the suits are preparing for an ever shrinking advisor force. Instead of drawing a red line at 6,000 advisors, next stop may be 5,000?

Otherwise, why clearly upset the very employees (advisors) who on a daily basis are the geese that lay the golden eggs? Bizarre.

Spousal Support: FINRA Suspends Advisor For Allowing Wife To Move Funds

 FINRA isn’t playing around with ‘procedure’ infractions as of late. Every “dotted i and crossed t” is to be minded if you want to remain disclosure free. Just this past week a new infraction and punishment was announced – as a broker allowed the wife of a client to direct transactions without authority or consent.
“Both the husband and wife were Morgan Stanley customers but the wife had no authorization over the IRA account in question.”

“The Financial Industry Regulatory Authority last week fined Eugene Nathan Gordon $5,000 and suspended him for 90 days for the activities that it said violated its far-reaching Rule 2010 requiring registered reps to “observe high standards of commercial honor and just and equitable principles of trade.”

“Gordon, who now works at WealthSource Partners, a Palo Alto, Calif., registered investment advisory firm, declined to comment on the circumstances behind the acceptance, waiver and consent letter that Finra accepted last Wednesday. He previously worked for 14 years at Morgan Stanley and predecessor firm Smith Barney in Palo Alto.”

“Gordon followed the wife’s instructions to make mutual fund trades resulting in 32 transfers of almost $317,705 from his client’s individual retirement account to their joint bank account over four years ending March 2017, according to the consent letter. The wife had no authorization over the IRA account for which Gordon was broker of record, according to the consent letter.”

Most of the backstory isn’t known, but we could postulate that the nexus of this complaint probably has something to do with a lack of marital bliss. And it is probably appropriate that a three month ban is applied for shuffling the better part of 300k out of ‘hubbys’ account.

Follow the rules folks, follow the rules.

Wells Fargo: “You want a 550% recruiting deal? Come right this way…”

Wells Fargo announced today that they will continue, in perpetuity, the largest recruiting deals on the street. They also reiterated their commitment to significantly reward recruiters for pushing valuable recruits to their multiplicity of platforms with increased recruiting fees that dwarf the industry standard.

Wells Fargo just extended the holiday season for eligible advisors, teams, and recruiters. But there is a bit more to the story that hasn’t been put out into the media over the past year that will grab your attention:

If you are a Tier 1, experienced advisor the actual top end potential with an end of contract kicker is 550%. Yes, you just read that right. 550%. One more time for effect: 550%

How does Wells Fargo get there for its employee channel recruits? First, it offers the aforementioned ‘traditional’ deal structure attached to a 9 year forgivable loan/contract. Then WF decides to add the real sweetener and offers Tier 1 advisors the option to sell their book within the Wells Fargo ecosystem for a stated and committed 225%.

Bam! Pop! Bang!

So if you are a 55 year old advisor at Merill Lynch with a partner, a junior advisor, and two client service associates doing $3m in annual revenue, do a little math. Why don’t we do a little math for you: that’s $16,500,00.00. Take another look at that number.

Meanwhile, with an ongoing recruiter payout that sits at 10% versus the industry standard of 6% – your friendly neighbor recruiter is HIGHLY incentivized to convince you to hit the mf’ing bid!

Take a look at a couple of teams that did just that late last year:

“In December, a five-broker Merrill team in Plano, Texas with $4.5 million of annual revenue joined the “advisor-led” channel of standalone Wells Fargo Advisors offices, following a $4- million team from Morgan Stanley that joined in Boca Raton, Florida, in September.”

If those teams chose the aformentioned deal, their ‘all-in’ payouts are $22M and $24.75M. Eye popping numbers.

Expect Wells Fargo to not only stop the bleeding in 2020 – but to be a favored destination for UBS, Merrill Lynch, and Morgan Stanley advisors looking for comfortable surroundings and a ‘back the truck up’ load of liquidity.

“Listen, you can’t make this sh** up…”; Morgan Stanley Advisor Speaks Up

In a short but impassioned conversation with a Morgan Stanley advisor of several decades, we were struck by his understanding of both the ‘arc’ of the industry and the serious issues that his own firm faces. A lot was said, and we’ve done our best to bring it to you as unfiltered as we possibly can.
Discussing the firm’s protocol exit: “What a sh** show of a decision that is and was. And who benefited the most from that decision? Certainly not the firm or the advisors, but securities lawyers…as nearly anyone with a book of any consequence quickly went out and hired one. If the firm, long term, things that this somehow works out in their favor (as they’ve been heard saying on conference calls) they are dumber than I even believe that they are. At some point a larger migration away from MS will hit the blotter. It will be obvious, when it does.”
Discussing former Smith Barney advisors still upset about the way Morgan Stanley does things: “All of us former SB guys still laugh at the way this place is run and how we are treated. Lip service, yeah that kind of lip service, is given to what we do for the firm at meetings and events with management – but it is only that, lip service. If you did a quick data search on who’s left over the past five years, I’d bet +70% of them are former SB guys.”
Thoughts on current leadership and a little about what Greg Fleming is doing at Rockefeller: “Most of us liked Greg Fleming. He wasn’t a complete douchebag in the classical sense that the ivory tower guys usually are. So he was respected. When he exited stage left we realized that our voice would be less and less heard. What he has built at Rockefeller is compelling and lots of us have given it a pretty good look. They will keep winning with that model, and credit to Greg for doing so.”
On the firms decision to jack up comp grid tiers, further inflaming the firms most succesful advisors: “Listen, you can’t make this shit up, you really can’t. Protocol exit and then a comp grid slap in the face. Seriously, fuck these guys. The protocol deal makes it immeasurably harder to leave, so kudos for that move (sarcasm). The comp grid stuff will add another wave of departures – you can bet on it. At this point, for get about any emotion or loyalty, it turns into math now.”
The conversation lasted about ten minutes and covered even more ground than this, with significantly more colorful language as well. We don’t think it is a surprise to hear a disgruntled Morgan Stanley talk about what ails the firm. It is interesting, though, to hear a 30 year veteran talk about the firm but still remain there. Interesting, for sure.

Expect More And Even Bigger Departures For UBS; Huddled Masses Becomes A Mob

In October nearly half of an entire UBS office in the suburbs of Columbus, Ohio walked across the street and opened a brand new Morgan Stanley location. That move, and some of the subsequent legal back and forth, has been well covered in industry pubs.

But its about to get worse for the shrinking wirehouse in Ohio. In conversations last week, at least one and possibly two of the largest teams in Ohio are in deep conversations to leave the firm.

One source close to a team in the northern part of Ohio said the following:

“They’ve done their due diligence and it is nothing more than timing at this point. Timing as to clients, team internals, and a few dotted i’s and a couple crossed t’s on their preferred deal. And if one were to give just a little bit of thought as to who the team is, I doubt most would be surprised.”

The other team in Ohio that looks to have its track shoes on to make a run for it is in the opposite corner of the state. And our source their said that the recently announced comp grid changes accelerated their plans:

“Any team that was passively engaged in due diligence in terms of a move is smart to accelerate the process. That is what they have clearly done. Why wait around to see how much they enjoy the ‘beatings will continue until morale improves’ culture? That makes zero sense. Expect action quicker than I previously thought.”

To believe that UBS brass thought that they could dramatically (up to 20%) shift both individual and team grids with limited dislocation of some of their prized teams is incredibly stupid. You have to wonder what those meetings were like in the beginning stages over the past year. Did anyone in the room stop and say, ‘guys this is a stupid fucking idea – we are going to get killed by attrition’?

Nataril and his direct charges have swung and missed several times over the past 18 months – or rather since the departure of the two Bob’s (McCann and Mulholland). Ask just about any FA at the firm and they’d quickly opine about the days of ‘quick wins’ and advisor-centric policies.

With Nataril they’ve gotten protocol exit, expense tightening, a near recruiting moratorium, and now comp grid changes that have turned the huddled masses into a mob. Nice work dude.

JP Morgan Securities Gets Adopted By The Private Bank; Expect Massive Changes To Compensation and Contracts

In a move that should send chills down the spine of every JP Morgan Securities advisor, bank brass has decided to fold the traditional wealth management arm into the banks ‘private banking’ arm. We’ve seen this particular movie before, and it doesn’t end well.
A little background here – the private bank advisors at JP Morgan are compensated via a salary and bonus structure. And are highly incentivized to peddle JPM banking products. A seriously stark contrast to the traditional ‘wirehouse’ trappings of JPMS.
Via AdvisorHub earlier today:
“J.P. Morgan Securities’ approximately 450 brokers are being combined into a single J.P. Morgan Chase & Co. business unit weighted by salaried bank-based wealth advisors, employees were told in memos and internal phone calls on Wednesday afternoon.”
“ The new U.S. Wealth Management business will include 4,000 advisors in 3,500 bank branches and the 450 brokers in 21 J.P. Morgan Securities offices, together with employees of the bank’s fledgling YouInvest online brokerage business. It will be led by Kristin Lemkau, most recently J.P. Morgan Chase’s chief marketing officer, who earlier worked at the bank as a public relations official.”
A significantly bigger concern than any compensation changes is this: many, if not all, of JP Morgan’s private bankers have ironclad employment contracts that include garden leaves, non-compete and non-solicit language – to say nothing of their lack of inclusion in the broker protocol.
JPMS advisors should be appropriately concerned what the next 12-18 months may hold for their careers. Expect JP Morgan to tighten their grip on their clients and revenue. Via comp changes and legal maneuvering. Expect it.

RBC Lawyers Claim Victory In Houston; Broker Vows ‘Story isn’t over here…’

Something a bit weird occurred in Houston, TX a couple weeks ago. A clear and concise broker complaint, wrongful termination, and loan repayment case was dismissed – not on the merits, but rather as a matter of procedure.
The specifics leave more questions than answers and probably accelerates further litigation from the advisor at the center of the decision.
“Kimberly Ripoll, who worked at RBC’s Sugar Land, Texas branch for five years until her termination in May, filed a wrongful termination, breach of contract and failure to supervise claim in Finra arbitration in July against the firm and a broker in the office.”

“In addition to treating her as an underling, “RBC created a toxic work environment through its failure to adequately staff the Sugar Land branch office, and its inadequate hiring, training, and supervisory practices,” the claim said. She sought to retain the $226,790.27 owed on her two promissory notes plus damages of about $15,000 per month for lost pay and benefits since her May 10 termination, and unspecified medical expenses and mental anguish damages.”

“A three-person Finra arbitration panel in Houston on Thursday granted RBC’s motion to dismiss her claims “in their entirety” on the grounds that Ripoll and the firm had no agreement to resolve disputes in arbitration, according to an award statement published on Thursday.”

Wait… no agreement to resolve disputes in arbitration? This should trigger every RBC advisor thats been recruited there in the past decade to closely evaluate their loan documentation. Arbitration is the obvious gold standard in the industry to avoid ‘long in the tooth’ civil litigation.

So what in the world happened here? We aren’t entirely sure, but you can bet that a Texas court is about to find out – and RBC would probably do well to settle this thing before the potential truth of what happened to a female advisor comes to light. Generally (besides the sordid tales of Ami Forte), when a female advisor comes forward in what remains a male dominated profession, heads roll.

Be careful what you wish for here RBC.