UBS Rumors Only Add To Attrition Issues – Large Teams Step Up Exit Due Diligence

UBS has been losing advisors for more than two years now. The firm has teetered on the brink of falling below the 6k headcount mark across the US for several quarters. Two years ago, that number was above 7k. Attrition at the firm, amongst its most productive advisors and teams, is a real problem.

In discussions with sources at the firm, the internal numbers are even worse. Currently, over the past year, only two managers in the entire country can claim a ‘net-plus’ number in headcount/recruiting. Even managers that have recruited well have lost more than they can bring in. Again (and to make the point clear), 95% of UBS branches and complexes have fewer advisors, assets, and revenue than they did a year ago.

And it’s about to get worse.

The revelation that UBS brass is seriously considering a merger with Credit Suisse (or any other potential sizable global bank) has the best and the brightest at UBS understandably spooked. Forget about the industry planted articles claiming that “not much will change for UBS Americas advisors in the event of a merger” – you know better than to believe that drivel.

Any serious industry veteran will tell you that a Credit Suisse tie-up will most certainly have ripple effects (at best) that are felt here in the US. Advisors could be forced to tie themselves to the firm with a fresh new retention deal, with plenty of non-protocol (read: non-compete and non-solicit language) legal hoops to embrace. And the value of the retention deal with be less than half as lucrative as any competitive recruiting offer. Comp will be adjusted down again in the coming years, management reduced (again), and the pivot to a private banking framework will be on the march.

The best and brightest at UBS understand this and are smartly evaluating their options. Meetings and phone calls have increased and the pipeline of firms like Rockefeller and the First Republic and bursting at the seams with UBS teams.

As a quick final thought for current UBS employees – do you think that Merrill Lynch advisors have enjoyed that last decade of changes at their vanishing brand? No, no they haven’t.

UBS Uncertainty – Merger Discussions With Credit Suisse Surface, Advisors Should Prepare For More Change At The Firm

Over the weekend it was discovered that UBS leadership has been considering potential merger partners, and Credit Suisse was specifically named. A like-minded Swiss firm that has already divested its US wealth management operations several years ago. The report claimed that the talks have been exploratory in nature and nothing is imminent or definitive, but this news begs a whole lot of questions.

What to make of it with respect to UBS advisors here in the US? How would a merger, of any kind, potentially affect advisors and teams that have continued to remain loyal to the UBS brand? Speculation could take this conversation anywhere, so let’s take some of UBS’ recent moves and put them in the context of a potential Swiss mega-merger.

First, there has been a tremendous amount of ‘cost-saving’ window dressing in the past couple of years at UBS (both here in the US and globally). A protocol exit was accompanied by a significant drawdown in recruiting bonus balances that sat on UBS’ balance sheet. The decision to exit the protocol meant that UBS was more comfortable litigating any move away from the firm as opposed to competing in earnest on the recruiting field of play.

Second, UBS has been furiously recruiting private bankers from Goldman Sachs, Alliance Bernstein, and even J.P. Morgan. They’ve pulled more recruits from the banking ranks than other channels so far in 2020. This is telling when you put in the context of creating a potential Swiss banking monolith that would be UBS + Credit Suisse. Where is the wealth management compensation model headed, longer-term, at UBS? If you pan out the writing seems to be on the wall.

Third, UBS is about to implement the announced comp grid changes that increase hurdles by 20% across the board to earn the same level of comp advisors have earned in the past. In other words, increasing unit profitability as the firm ‘explores potential strategies’ that could find itself either executing a mega-merger or selling different pieces of itself to meaningfully push up its value i.e. stock price (which many of you know hasn’t moved in a meaningful way in years).

The report itself comes from Bloomberg news, here is what they reported:

“UBS Group AG Chairman Axel Weber has been studying the feasibility of a mega-merger with rival Credit Suisse Group AG as part of a regular thought-exercise on future strategic options, according to people familiar with the matter.”

“UBS, the world’s largest wealth manager, has been exploring the question with consultants but it hasn’t raised the topic at the level of the executive board, the people said. The assessment is part of regular internal planning procedures and there are currently no formal discussions going on between the two banks, said the people, who asked for anonymity because the information isn’t public.”

“Both banks declined to comment. Speculation about a deal was stoked earlier Monday when Swiss finance blog Inside Paradeplatz wrote that Weber and Credit Suisse’s chairman Urs Rohner could agree on a merger as early as next year. Both banks declined to comment on the report.”Bottom line, where there is smoke there is always fire. If it isn’t a Credit Suisse merger, something else is afoot. More change is coming to UBS and it will trickle down to advisors that are employed by the firm. It will be quite interesting to see if this type of news furthers the current trend of larger teams leaving UBS for greener (and more stable) pastures.

 

Rockefeller Lands Another Flagship Team; Nets More Than $3B In Assets

Rockefeller continues its dominating ways at the top end of the wealth management recruiting arena.  Since Greg Fleming’s arrival over two years ago, the exclusive wealth management company has set their sights on wirehouse teams that claim to have better than a half-billion in assets under management. Fleming has added 84 teams so far, 23 this year alone, with very competitive economic packages.

Today, Rockefeller announced the arrival of Marie and Shawn Moore. The $5M team ranked #42 on Forbes’ list of top women advisors and in Texas, ranked #1 with almost $500M in AUM. According to FINRA’S BrokerCheck, Marie was a Morgan Stanely lifer includes predecessor firms like Lehman Brothers and Smith Barney.

Last week, Rockefeller has added more than $2B+ in client assets spread across three different teams. Two from UBS and one from Merrill Lynch.

Bob Fink and John McMahon made the move with a $1B in client assets under management and better than $5M in annual revenue. Bob, started with Merrill in 1996 and ranked #44 on Forbes’ list of the top northern California wealth advisors. Both he and McMahon has been registered with Merrill for 39 years without a single customer complaint or negatives mark as shown by their BrokerCheck records. The team will be a part of Rockefeller’s northwest division, and work under by Brian Riley, who was also a former Merrill Lynch private wealth manager.

From UBS joined Jason Zilveti in Scottsdale, AZ with $2M in annual revenue and $400M in client assets. As well as Francis Amsler and Marc Laborde in Houston, TX adding $800M in client assets under management and another $4M in annual revenue. They make up the third private wealth group in the Houston branch.

To say Rockefeller is on a role doesn’t quite get it done. Right now, they are the wealth management ‘belle of the ball’ and everyone wants a dance.

 

Bernstein Burnout: Why Is The Firm Grossly Underpaying Their Advisors?

There has been an ever-growing stream of Bernstein advisors that have left the firm over the past year. And that stream has seemed to pick up speed as 2019 turned into 2020. Generally, a movement that finds advisors exiting a firm like Bernstein finds its way to one, maybe two competitors at best; but that hasn’t been the case here. Bernstein advisors have exited to RBC, First Republic, Wells Fargo, Stifel, Morgan Stanley, and others.

So why has the exodus from Bernstein accelerated and seems to be doing so again?

Beyond the different ways that competing firms have become comfortable with taking on the Bernstein advisor and their model, and paying them huge bonuses to do so, it comes down to payout. Yes, simple comp grid mathematics is moving the needle in a huge way.

To elaborate it out a bit further, the largest advisors and teams at Bernstein are topping out at 22-23% on the firm’s grid. A team generating $5M in annual production is getting a net somewhere around $1.1M – $1.25M in W-2 compensation. Fully half of what a Morgan Stanley, UBS, or Wells Fargo team would receive – to say nothing of even more generous payout options at places like RBC (albeit just a few basis points higher than the wires).

That kind of blatant disregard for what should be considered ‘fair market value’ in terms of the traditional services and the role that AB advisors play with their clients – simply stated, isn’t fair. Bernstein advisors are wising up to the truth that they are grossly underpaid versus their peers. All the while managing UHNW relationships for elite clientele; generally serving 70-90 wealthy families per team.

Now take that same business to competitors like RBC or Wells Fargo and the team makes $2.5 M – $2.6M annually, operating in an ‘open architecture’ environment, and only has to move 80 households while they are at it.

The disparity in payout is a massive blind spot for Bernstein and will continue to, deservedly so, agitate advisors into the welcoming arms of competitors. One wonders when Bernstein, based on departures, may be forced to make meaningful changes to their grid?

 

Belgium investigates Credit Suisse over hidden accounts

Belgian prosecutors have launched an investigation into whether Swiss bank Credit Suisse (CSGN.S) helped some 2,650 Belgians hide their accounts from tax authorities.

The investigation by federal prosecutors is at the information-gathering stage and no charges have been brought, a spokesman for the prosecutors said on Monday.

The inquiry concerns accounts held between 2003 and 2014 on which Belgian prosecutors received information last year from French authorities, who have also conducted their own investigations into the bank and French customers.

The spokesman said the case concerned up to 2,650 Belgian clients, although some may have already declared their funds to the tax authorities.

“We strictly comply with all the applicable laws, rules, and regulations in the markets in which we operate,” Credit Suisse said in an emailed response to a request for comment on the investigation.

The bank wishes to conduct business with clients who have paid their taxes and fully declared their assets, it said.

Swiss banks have faced similar probes in several countries over the past decade after the country was forced to give up its cherished tradition of banking secrecy.

Original Source: Belgium investigates Credit Suisse over hidden accounts

 

Trump and Jared Kushner’s personal banker is under review by Deutsche Bank over her purchase of a $1.5 million Manhattan apartment from a Kushner-owned company

Deutsche Bank has launched an internal review into the personal banker for President Donald Trump and his son-in-law, Jared Kusher, The New York Times first reported Sunday and Business Insider confirmed.

The company is looking into Rosemary Vrablic and two of her coworkers regarding a 2013 purchase of an approximately $1.5 million apartment on New York City’s Park Avenue from the real estate firm Bergel 715 Associates, a company that Kushner has a financial stake in, according to The Times.

Kushner disclosed Friday in a financial report that he and his wife, Ivanka Trump, earned between $1 million and $5 million in income from Bergel 715, and a source told The Times that Kushner was a part-owner of the firm when the transaction was made.

Banks often have policies barring employees from doing personal business with their clients in order to avoid conflicts of interest between bankers and their employers.

Deutsche Bank spokesperson Daniel Hunter confirmed the review and directed Business Insider to its statement to The Times, which said: “The bank will closely examine the information that came to light on Friday and the fact pattern from 2013.”

Deutsche Bank also told The Times that it was not aware that its employees — Vrablic, as well as Dominic Scalzi and Matthew Pontoriero, two of her coworkers on the company’s private-banking team — had done business with a company connected to Kushner until contacted by the paper.

Kushner and his family have banked with Vrablic since before she started at Deutsche Bank in 2011, according to The Times, and he told the House Intelligence Committee that he introduced Trump to Vrablic “about six years ago.”

Vrablic entered the public spotlight during Trump’s 2016 presidential campaign when he told The Times in an interview about his alleged struggle to find bankers: “Why don’t you call the head of Deutsche Bank? Her name is Rosemary Vrablic.” (Vrablic is and was not the head of Deutsche Bank; that was John Cryan at the time).

Trump’s relationship with Deutsche Bank has repeatedly come under scrutiny. Last year, The Times reported that the bank had loaned him more than $2 billion over more than two decades — with Vrablic personally steering more than $300 million his way despite his long history of defaults.

Federal prosecutors from multiple jurisdictions including the FBI opened an investigation last year into Deutsche Bank after an employee flagged a series of suspicious money transfers between Kushner Companies and Russians.

Lawmakers have also been seeking to use the bank as a way to gain a window into Trump’s personal finances, as it has acknowledged it holds private copies of his tax returns.

Kushner and Vrablic could not be reached for comment on this story.

Original article (link)

 

Goldman Sachs Donut Hole: Advisor Payouts Much Lower Than Previously Believed

Goldman Sachs has an interesting problem on its hands. And it’s a problem that many of its rivals are becoming more and more comfortable exploiting over the past 6-9 months. The problem is one word: payout. It is much worse for Goldman advisors than previously believed.

It has been well known in wealth management circles that Goldman Sachs pays its wealth managers a stunted grid for a couple of reasons – the brand name that brings deep-pocketed clients to the firm, and the deals that flow through one of (if not ‘the’) the most exclusive and well-kown global investment banks in the world. Advisors benefit from both; because of that Goldman essentially caps payouts at 30% for even the best of its earners.

But that isn’t the entire story. A full 25% of an advisor’s grid payout is tagged as deferred compensation. So the top end grid payout is actually closer to 20% – less than half of what some of the best earners at Morgan Stanley, Wells Fargo, First Republic, and others are paid on a monthly basis makes its way to the paychecks of Goldman Sachs wealth managers.

That real disparity is why you are seeing an uptick in “Goldman Sachs team move to …” headlines across the wealth management industry. UBS has been aggressively recruiting Goldman teams and has found significant recent success. The success UBS has had has spurred the interest of other firms in the wired category.

Goldman teams are not being discounted as they once were. Their value is attaining a ‘par value’ alongside other recruited wirehouse teams that firms are engaged within the current environment. The opportunity for Goldman advisors to explore their options have gotten remarkably profitable – in both the short and long term.

Keep an eye on movement out of Goldman; we expect it to continue.

 

Massive Merrill Team Jumps To First Republic; Phil Scott Group In Washington State Take $2.7B In AUM To New Firm

A massive move occurred in the Pacific Northwest last week. The Phil Scott Group out of Merrill Lynch made the move to First Republic. The numerics surrounding the transaction are eye-popping all around and sent shockwaves through BofA/Merrill in that part of the country.

First, Mr. Scott was a 36 year veteran of Merrill Lynch an absolute ‘thundering herd’ lifer. He joined the firm out of the Naval Academy in 1984 and seemingly never considered leaving. That all changed last week. Chatter in Seattle and the surrounding wealth management organizations was abuzz given the largess of Mr. Scott and his team.

The numbers are just are even bigger than the surprise move: $18M in annual revenue and $2.7B in client assets under management. A huge win for First Republic in the region. Doing a little napkin math – the total deal for the team given the revenue stated above will climb beyond the $60M dollar mark. Wow.

Mr. Scott is a Barron’s ‘Hall of Fame’ advisor and his Barron’s team bio reads as such:

“Phil joined Merrill Lynch in 1984 after graduating from the U.S. Naval Academy with degrees in International Relations and General Engineering. His extended tenure with Merrill Lynch is paralleled by that of his team members, many of whom have collaborated with Mr. Scott for more than 15 years. That continuity and consistency, Phil believes, allows the team to deliver an exceptional client experience.”

Pulling back to 50,000 feet – the narrative continues for Merrill Lynch, as they lose yet another huge producer and capstone in a money center city. As has been occurring for a number of years now, the largest producers are leaving the firm at a clip never before seen at Merrill. Choosing a name like First Republic is of real interest; but maybe more so is the reality that a 36 year veteran of Merrill finally decided the firm was no longer his home.

 

Regionals Deal With Deeper Reductions In Profitability, Wirehouses Outperform During The Pandemic

Wealth management organizations aren’t one dimensional and shouldn’t ever be seen that way. Circumstances can often dictate their collective profitability and success – and unforeseen circumstances can shed light on the depth and breadth of firms’ revenue streams. The same conversations about global investment banks having priorities that may stray from wealth management seem to sound a bit differently in the midst of a pandemic. Revenue and profits that are tied directly to asset prices (i.e. wealth management) took a relative beating, while other departments held up.

A great example of this dichotomy is Raymond James and Ameriprise’s performance juxtaposed versus Morgan Stanley’s over the past week of so. Both Raymond James and Ameriprise announced reductions in overall revenue and profitability (with Raymond James even announcing the need to cut expenses across every level) while Morgan Stanley ballyhooed a knockout quarter; so much so that James Gorman took to all of the finance shows to smile and glad-hand.

Raymond James announced revenue, profits, and return on equity of -34%, -8%, and -42% for the quarter, ouch. Ameriprise announced revenue and profits that were down -28% and -7%, also, ouch. Morgan Stanley, on the other hand, announced increases of +6% and +16% respectively (to say nothing of the firm’s +73% increase in trading revenue). That breadth and depth of quarterly earning power resonate with advisors looking at a potential ‘knight in shining armor’.

The takeaway here is that balance sheets matter when advisors are evaluating a firm’s ability to add an extra 5-10% to client acquisition and retention. Dealing with short term expense cuts versus extolling the firm’s strength in the midst of a crisis is a net ‘win-win’ for Morgan Stanley versus Raymond James. You better believe that those stats and dialogue will be used when the firms respectively meet each other on the recruiting playing field.

Neither Morgan Stanley or Raymond James are perfect organizations – both of them have their pros and cons – but as of this quarter and these circumstances that are 2020, Morgan Stanley holds an edge.

 

Rockefeller Keeps Winning Big Team ‘Bake Off’s’ – We Tell You Why

The Rockefeller name burst on to the scene in earnest when Greg Fleming left Morgan Stanley and was announced as the firm’s leader. The two names resonated across the wealth management spectrum, as did the whispers of the deep and heavy pockets Rockefeller was rumored (and of course confirmed) to be armed with at the time. The two (Fleming and Rockefeller) seemed to be well suited as a pair, and that has unquestionably been the case.

Besides Mr. Fleming’s resume’ and presence at the firm, what is it that continues to draw the largest of wirehouse firms to the name? We’ve spoken to a number of advisors and the answer seems to be three-fold, and once explained, somewhat obvious. Take a look at what we’ve been hearing throughout 2020 and judge for yourself:

  1. Branding still matters, and the Rockefeller name resonates.Given the movement to both the RIA and independent space over the past decade (and there is no doubt that it has moved at scale and continued its momentum) one would think that a new entrant to the ‘full-service space would struggle. Case in point, FieldPoint Private, a firm with well-heeled management and a wirehouse like set up. The divergence between the two can initially be chalked up to branding. The Rockefeller name emits incredible gravitas and history. It is instantly recognizable in every corner of finance and wealth management. Nearly every advisor is aware of the who/what/where of Rockefeller, while most have no idea who FPP is. The name, the brand still matters in this business.
  2. Greg Fleming continues to keep the firm ‘up-market’.The commitment to essentially focus on large wirehouse teams has paid off in a big way. Each and every hire gets a resounding chorus of praise from the wealth management press and the Rockefeller story is told again. This was the initial HighTower model that started off well, but was too quickly discarded – principally because HighTower wasn’t capitalized to the extent that Rockefeller is and will continue to be. HighTower abandoned the strategy and ended up with three different platforms and payout structures; effectively abandoning the branding story it had built. Rockefeller and Greg Fleming have stayed committed to the script.
  3. Advisors that have joined the firm and are deep into due diligence and evaluation tell us that Rockefeller’s tech and the platform are second to none.In an age where advisors are more closely tied to their laptops and mobile devices rather than their desktops to service clients, the tech at the firm that they join is incredibly important. Every single advisor that has had any depth of contact with the firm has extolled their commitment to technology. The term ‘ease of use’ comes up often when the conversation turns to tech with respect to Rockefeller.

The themes here are heavily weighted toward branding. If you are a team of size at UBS, Merrill, Morgan or Wells you are aware of Rockefeller and have either been watching them closely or are engaged in evaluating them as a potential landing spot. Their deal is robust and they know it. Their brand is robust and they know it. That institutional level of confidence is appealing to Barron’s/Forbes types of advisors. They want to be around winners – and Greg Fleming is just that.

He’s also closer. When Rockefeller is involved in competitive recruitment, they usually win.

“This business is mostly based on ‘do I like that guy’…” – Roger Sterling, Mad Men.