Stifel’s Historic Recruiting Surge; The Man Behind The Firm’s Epic Pivot From Passive Recruiting To Two Years Of Domination

It isn’t a secret that Stifel has been on a recruiting tear. A run that stretches back two, maybe two and a half years. A massive pivot for the firm from being, at best, opportunistic with their recruit hires, to being methodical, and ultimately dominating the recruiting arbitrage game.

What do we mean by ‘recruiting arbitrage’ exactly? The recruits and assets that are brought into the firm versus current Stifel advisors that leave the firm. By that measure (and total AUM recruited in 2018/2019) Stifel is beating everyone. And they are doing it in a way that de-emphasizes the size of the recruiting check – while emphasizing culture. A difficult two-step in today’s wealth management environment and ‘seller’s market’.

Stifel currently competes with two firms for talent that can essentially offer recruits 500% deals. Wells Fargo and Rockefeller. Just go check their profiles on our recruiting page. Stifel’s numbers ring in at anywhere from 200% – 250%. Remarkable.

So what is the secret sauce? What, or who, is it that started and continued this historic surge for Stifel?

We could point to Stifel’s long-tenured and highly respected CEO, Ron Kruszewski, for starters. Ron has spent 25 years rocketing Stifel away from its one time contemporaries like Baird and Hilliard Lyons. Stifel no longer compares to either of those firms in any reasonable manner; rather they are a legitimate nationwide presence after building reputations of scale in research, wealth management, mergers and acquisitions, and banking. Ron has provided the leadership and vision for all of it.

But we are talking about a huge pivot in wealth management recruiting. A pivot that saw Stifel from having limited strategy to becoming the outright leader in net recruited assets across the industry in 2018 and 2019. That’s a really big deal.

So here’s the name you need to be acutely aware of (hired by Ron Kruszewski in early 2016) and the architect behind Stifel’s recruiting dominance that began in mid-2017… John Pierce.

John has a history of recruiting and management success across the industry that has spanned better than 25 years – first at Merrill Lynch, then at Ameriprise (building out there initial recruiting infrastructure), and now to eye-popping success at Stifel.

The numbers speak for themselves, as do a few of John’s colleagues, who we spoke to on background about the process and results that have followed him to Stifel. First the numbers:

Per media reports – Stifel recruited ‘net’ assets under management of +$17B in 2018. Stifel’s momentum and John’s implementation carried over into 2019 with an even stronger net assets year that rung the bell at +$19B. A tally that totaled nearly $36B in two years. Staggering for any firm, much less a firm that used to be categorized as a ‘regional’ with a passive interest in recruiting.

To be clear, Stifel has always had a culture of retention. They simply do not lose many advisors based on their culture and never changing comp grid. Those were attributes that John Pierce used to his and the firm’s advantage to really ramp up the narrative that proceeded this recruiting run. Smart move.

To back up those results here are a few comments from a couple individuals that have worked closely with John at Stifel over the past three years:

“John brought structure to what most of us were doing sort of ‘ad hoc’ out here in the field – and made us accountable. Some didn’t like it at first, as you can imagine, but we all needed a kick in the ass. Results matter, and putting together a formula that’s worked, nobody has any issues now.” – via a Stifel contact in Texas.

“I’d sum up John’s time at Stifel like this; tireless worker and committed to his process. And it has worked. If the process works there isn’t any real argument against it. He shook things up pretty good when he arrived, and was backed up by Ron (Kruszewski), so we knew this was for real. Following up the Barclay’s purchase with his hire was smart, really, really smart.” – via an east coast Stifel contact.

We spoke to a couple more Stifel contacts about the recruiting success and John Pierce’s leadership, and the responses were nearly the same as above. Results matter, and he has delivered.

It will be interesting to see how 2020 turns out as the wires are back in the game with out sized recruiting deals and an appetite to end their losing streaks. The difference is this though, it is much easier to sustain momentum and narrative in wealth management recruiting than it is to build it. Pierce and Stifel have a leg up on the coming wirehouse horde.

Wells Fargo CEO: Don’t Assume All Is Well, Significantly More Clean Up To Do

When newly minted Wells Fargo CEO, Charlie Scharf, embarked on his initial earnings call most analysts were hoping for rainbows and lollipops with respect to the firms brand and reputation recovery.

That is not what they got, and in fact Mr. Scharf went so far as to go the other direction, lowering expectations that the final shoe may not have yet dropped.

Per media reports:

“Wells Fargo CEO Charlie Scharf acknowledged at an earnings call with analysts in early January that mistakes of the past are still impacting the firm.”

“Wells Fargo made “terrible mistakes,” Scharf said in that call, referring to the bank’s long-running scandals and the ensuing scrutiny from regulators.”

“We have not yet met our own expectations or the expectations of others. We must do what’s necessary to put these issues behind us,” he said last month.”

A sobering monologue if there ever was one – but smart by Scharf to lower expectations over the short term. But we wonder, what does that mean for the wealth management division, and competitive recruiting?

Wells Fargo continues to have one of the largest deals on the street (approaching 500% when including a post deal/deal) and their recruiting has trended upwards over the past two quarters. It has become a ’50/50′ proposition in that most weekends advisors leave WF but the same amount with like-minded assets and revenue join.

If managers and WF recruiters were smart they would leverage Mr. Scharf’s comments as ‘smart leadership’ in convincing wirehouse competitive recruits to join the firm. Much the way UBS rebuilt its reputation ahead of competitors during the financial crisis with Bob McCann and Bob Mulholland – smart leadership.

When competing among all wirehouses that seemed to have started 2020 with a renewed vigor for recruiting – any advantage should be leveraged in every possible way.

Reverse Churning Nonsense: Edward Jones Lawsuit Dismissed, But Plaintiff Lawyers Vow To Fight On

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 media 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.”

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.

No Longer Protected; The Number Of Barron’s Advisors Fired In The Past Two Years Has Skyrocketed

Over the past few years the stories of Barron’s Top 100 advisors being fired has grown in a way that begs all manner of questions. Questions every bigger producer should be asking themselves and taking serious steps to protect their book, their career, and their reputation.

A few months ago another ‘advisor of scale’, Craig Findley, was fired from UBS. As the details leaked out he wasn’t fired for industry red lines such as unauthorized trading or fraud, but rather ‘outside activities, personal matters, and expense reporting’. Potential offenses which have largely been favorably interpreted on behalf of big producing advisors like Mr. Findley.

(**The latest on Craig Findley via media reports: “UBS explicitly said that the termination was not related to sales or client-related issues. But the U-5 language—including the use of “outside activities” rather than the more common termination cause of unauthorized “outside business activities”—suggests personnel and expense issues, said people familiar with compliance and legal notices who declined to be identified because they were not familiar with Findley’s case.”)

There is a narrative amongst the broker masses that believes that larger advisors increasingly have a target on their back. Wirehouses are particularly of interest as more big name advisors have been fired from those firms and made for splashy headlines. One wonders if that narrative has any merit to it, or is it simply an ‘us against the man’ mentality finding a cause to rally around?

Whether that narrative is real or perceived it still leaves us with a problem to solve. With sometimes billions in assets under management and multiple millions in annual revenue, advisors are brands that need to be protected.

Every manner of precautions need to be considered. Some suggestions that should be seriously considered are as such: personal legal counsel (the firms lawyers are NOT your lawyers or your friend), a compliance focused, salaried employee on your team, quarterly reviews of firm policy, annual off-site team meetings focused solely on client communications and how they match with firm policy, copious note taking, and any other measure that stays two steps ahead of your firms compliance and legal departments.

If you think one of those suggestions go too far…you are already at risk. This goes beyond personal integrity. You are protecting an asset that you’ve built over decades and may want to pass on as a legacy to your children. Should you be so careless as to leave it in the hands of an annual firm audit and firm paid compliance personnel? No, no you shouldn’t.

The reality today in wealth management is this, find a way to keep yourself uncomfortable and retain as much control of your business as you can. Be personally vigilant – it may save your career.

The Chilling Saga Of Tom Buck; An Ongoing Reminder To Legally ‘Gird Your Loins’

The Tom Buck saga has been an epic meltdown worth paying attention to for a little more than four years. Eventually culminating in a 40-month federal prison sentence for the once revered and Barron’s Top 100 ‘certified’ financial advisor.

A short little recap. Tom was the biggest Merrill Lynch retail advisor in Indiana for more than a decade. Merrill compliance completed an audit and something didn’t smell quite right. Tom was let go. But that wasn’t the end of the story.

Federal prosecutors in Indianapolis took a liking to the details of the case and pursued what they saw as fraud amongst other criminal activities such as not telling clients about alternative fee structures available to them. Federal prosecutors brought charges and indicted Tom.

Tom settled, monetarily, with financial regulatory agencies to the tune of better than $5MM bucks.

He decided to plead guilty to a few of the charges brought against him. And after several delays (and proof of certain facts that clients weren’t monetarily harmed in any way and actually made money under his commission based tutelage) He was sentenced to 40 months in federal prison.


Now, word on the street is that federal prosecutors in several surrounding states (Illinois, Michigan, Ohio, Missouri) are looking to make the same kind of splash by pursuing so-called ‘bad actors’ within the broker ranks.

Federal prosecutors offices are aware of the press this case garnered and the ease at which it was executed. And they likely believe there are many other advisors out there with a similar profile.

Again, chilling.

While you may not want to admit it to anyone out loud, or even at the next branch office party or wholesaler golf junket – Tom Buck is a troubling tale for brokers who came up doing things a certain, and legal, way. Used to be, if an advisor of scale cut a corner or two he’d get a slap on the hand, maybe a note in his file, and be told to clean things up. All while keeping the entire process in house. But now?

If this story didn’t scare you and reset your idea or ‘risk management’ as an advisor we suggest you reconsider. Please take note and beware – times have remarkably changed. It is time to gird your loins.

BofA Continues To Punk Merrill Brand; Commercial ‘Fades To Black’ Famous Merrill Logo

Maybe this was the plan all along, when a shotgun wedding occurred in 2009. Bank of America was given control of Merrill Lynch and its 90 year history as the preeminent wealth management brand in the United States, and has systematically marginalized its advisors, brand, reputation, and overall standing within the industry.

The latest Bank of America commercial, dubbed “A Single Defining Moment”. The commercial mentions ‘Merrill’, not Merrill Lynch and at the end of the commercial the Merrill Lynch logo is wiped out in favor of Bank of America’s logo in less than a second. The entire spot is a testament as to how the bank views Merrill Lynch and its advisors – a division of the bank with the mandate to move as much product as possible.

It still is remarkable that the name has essentially been shortened to just ‘Merrill’ by the bank. No longer Merrill Lynch as its been known and revered for decades and decades. Just Merrill. Like the name of a legacy intern fresh out of a private university starting at a branch in Connecticut. Seriously.

The constant leak of advisors from Merrill that are of scale is the only story that matters. Irrespective of name changes and cultural appropriation – who leaves and the assets they take with them is what matters. And that continues unabated. No matter what additional headcount via bank branches or Merrill Edge add up to, the biggest advisors at Merrill continue to move to less constrictive pastures.

Still, the commercial is striking and revealing unto itself. Emblematic in many ways. The thundering herd is no longer what it used to be, no longer thundering, and no longer the largest herd on the street. Bank of America has hollowed it out, and not looking back.

Management Risk Assessment: Branch And Regional Management Has Become Akin To ‘Walking The Plank’

A couple of headlines have crossed the wires as of late noting continued shifts in branch management as well as regional management structures. Moving actual geographies as well as position shifts and title changes.
One question we’ve pondered, does anyone actually covet branch management positions anymore? Given the regulatory and compliance risk, as well as ever shrinking pay packages, you’d think most would run from the specter of increased decision making yet increased risk?
As a manager you could just as well be fired for someone else’s mistake as opposed to your own. Is that really worth an extra 100k a year as a producing manager? Probably not.
And what about branch and regional managers that aren’t producers? Talk about a career path fraught with risk. While their value is obvious in larger metro areas, the smaller city management career path is scary.
Take a look at an example at Morgan Stanley (again):

“The shift continues a whirlwind of branch management changes in the wirehouse’s south Florida market, where broker exits have been accelerating, according to headhunters.”“Byrnes did not return a call for comment on his new role. His remit will be in central Pennsylvania, a Morgan Stanley spokeswoman confirmed.”

“His Florida post will be filled on an interim basis by Michael Higgins, Morgan Stanley’s North Palm Beach/Boca East manager, the sources said. The complex also includes offices in West Palm Beach, Stuart, Melbourne, Palm Beach Gardens and Vero Beach.”

“Byrnes had been running the complex since January 2017, after he stepped down from overseeing the Southeast region as part of a reorganization.”

In other words, job security is minimal, and you can be picked up and shipped off to a new geography at a moments notice. And be careful, that new hire advisor could slip up and cost you your job. Management in the world of financial advisors is a risky, risky game.

Morgan Stanley Crushes Earnings Expectations; Wealth Management Outperforms, Profit Margin Pushes Past 27%

Morgan Stanley is moving today, and it has its wealth management division to thank. In two short years executives at the firm have pushed profit margins from roughly 20% in the division, to better than 27% – a number that most thought would take a couple more years to manufacture.

Now, the next profit margin goal has been set by James Gorman – 30%. And all of this as the firm returns to aggressively recruiting large advisors and advisor teams.

Via media reports:

“We delivered strong quarterly earnings across all of our businesses,” CEO James Gorman said in the release. “Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income. This consistent performance met all of our stated performance targets.”

Whether good or bad, Morgan Stanley is seen as the purest play in wealth management amongst advisors. It no longer competes with Merrill Lynch in a meaningful way as the ‘whimpering herd’ has been nurtured by Bank of America.

Advisor attrition has slowed based on the firms protocol exit strategy. It seems that the policy is working dramatically better at Morgan Stanley than UBS. And the recently announced comp grid adjustments seem far less obtrusive than those announced by UBS as well.

One manager we spoke to at the firm this AM said the following about the current state of attitudes amongst advisors: “I’d say it’s a 60/40 proposition. 60% are happy with the current trajectory of the firm, and 40% are lukewarm. Some still hold Smith Barney grudges and there isn’t much that can be done about that. But this is a place where the headline on your business card still is a net positive in attracting clients and assets. Most advisors get it.”

Morgan Stanley is in a generally good spot in relation to its wirehouse competition. Of course, that’s a category rife with long term issues, but for today they can bask in the glow of beating earnings expectations.

That Didn’t Go So ‘Well’; Wells Fargo Loses 211 Net Brokers In Q4, Profit Plunges 63%

Looks like Wells Fargo could use a do over in their wealth management unit when it comes to the fourth quarter of 2019.

In fact, you can imagine that managers and executives in and around the wealth division couldn’t wait for the 2020 NYE ball to drop a couple weeks ago – cause 2019 was brutal.

Some numbers to digest:

  1. Wells Fargo lost a ‘net’ 211 advisors in the fourth quarter alone. That’s after pretty strong recruiting momentum in Q4. So the real number is probably closer to 300.
  2. In a raging bull market the wealth division’s profits took a beating – down 63% year over year.
  3. Expenses also soared, up 23% from the year ago period.
  4. Meanwhile, despite the three pain points above, this was Wells Fargo’s most successful recruiting year ever, based on head count and recruit metrics – average T12 and AUM.

The headlines will sting a little bit over the next week and may even slow some recruiting momentum that has been built at the firm. The pipeline at Wells Fargo, as we hear it from recruiters, is pretty robust. Offering the biggest deal on the street certainly is paying its dividends.

But the numbers above are a seriously deep hole to dig out of. 2020 needs to be a year of ‘quick wins’ on the recruiting trail, and headlines that don’t derail the fragile but recovering reputation of the firm.

A bottoming out of the internal metrics at Wells Fargo WMA should set everyone up for a rousing 2020 Q3 and Q4 though. Let’s see if they can properly take advantage of both deflated numbers and expectations.


Bizarre Firing: Morgan Stanley Advisor Files $30M Lawsuit Against Former Firm

In another example of reasons why you should keep your friends close and your personal securities lawyer even closer in today’s wealth management environment, a former Morgan Stanley broker has filed a $30M lawsuit against the firm. Sighting wrongful termination, and unjust enrichment, the advisor may just have a case.

Per Reports:

“The termination cost (Kerry) Moy his 34-year career as a wirehouse broker and more than $100 million of assets from customers reluctant to follow him to Western International Securities, where he is now registered as an independent investment adviser, according to Robert Girard, a plaintiffs’ lawyer who is representing him.”

“Moy’s restaurant career was widely publicized in several national and local articles and was likely known by Morgan Stanley when they recruited him in 2012 from Merrill Lynch, where he had worked since the start of his brokerage career in 1984, according to Girard. The firm also had earlier approved the outside business activities that he had disclosed, he said.”

What an interesting twist of events. Morgan Stanley woos and recruits a well-known advisor who happens to have a highly publicized basket of restaurants that have contributed to the growth of his book of business, and by and large, the local reputation of the firm he works for. Morgan Stanley is keenly aware of the ‘outside activities’ that Mr. Moy is involved in and has known about them for years.

And then he is abruptly fired. His FINRA record and the language connected to his dismissal is a mystery given that the firm was surely aware of Mr. Moy’s restaurant activities. He has no previous events on his BrokerCheck record, other than a lawsuit stemming from a limited partnership Mr. Moy was involved in. Several months later, his wealth management career is over.

The take away here is simple. As a financial advisor, should you find yourself a party to a lawsuit, tax lien, customer complaint, or any manner of ‘inquiry’ – in the current compliance and legal environment in the industry – you are highly likely to be fired. If you aren’t taking several extra steps to protect yourself in the event you are falsely accused, you are obfuscating your duty to be a fiduciary of your own career.

Or better yet, get out of the wirehouse space altogether and open up your own shop. Food for thought.