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.


Wells Fargo Adds Big UBS Producer In SF; Wells PWM Continues Current Momentum

A couple of narratives continue to plant flags in the current wealth management environment. UBS keeps losing advisors of note and Wells Fargo remains aggressive in pursuing and winning them. In spite of UBS’ protocol exit and efforts to retain legacy advisors, there seems to be too much overhang from missteps early in 2020 that are convincing advisors to seek greener pastures.

More of that happened today in San Francisco, CA as Craig Issacson moved to Wells Fargo in the city. Weighing in at just north of $1M in annual production and better than $120M in client assets, Wells Fargo won the prize as it competed with other firms of note in its category.

The Gershman Group CEO, Roger Gershman commented briefly on today’s move, “The Wells Fargo PWM opportunity is significant and lucrative. It continues to resonate with advisors up and down the spectrum. They are appropriately aggressive for the right advisor and team.”

As Wells Fargo remains aggressive in the recruiting space advisors continue to get more and more comfortable with the executive changes that have been made this year, as well as the depth and breadth of the offerings at the bank itself. Juxtaposed against the likes of UBS, Wells offers several pathways for advisors and the opportunity to move in and around their ecosystem.

As an example, at a minimum Mr. Issacson inked a deal worth 300% of his current annual production, while also having the opportunity to add another +200% should he decide to sunset his business within the Wells Fargo system. Or…he can choose to go independent within Wells’ framework should he choose to do so at the end of his current deal. Having options on top of a sizable stack of recruiting cash resonates.

Proof of that narrative is found in Mr. Issacson’s move today.


UBS Exodus Continues with Steven Mitchell RIA Transition

On Monday, Steven J. Mitchell became the latest in an ever-growing list of UBS brokers to declare independence this year. Reuniting with former UBS colleague Phil Fiore, Mitchell joined the New York City office of Procyon Partners, an RIA established in 2017.

“I was always intrigued by the RIA and independent space,” Mitchell stated in an interview. That intrigue was no doubt enhanced by his new partner’s success. Fiore has grown client assets to over $3 billion in the past three years since he started the firm.

UBS isn’t crying foul over the move, but they are throwing some shade. Mitchell was discharged from the firm in May for failing to complete mandatory training modules. Fiore was asked to leave in 2016 after violating rules on disclosing client-related outside business activity.

Is this a case of two rogues banding together or a warning sign of systemic problems at UBS? Earlier this month, the multinational investment bank lost six wealth management brokers in three regions. Cumulatively, the six were managing roughly $800 million in client assets.

The Sensational Six UBS Defections in July
Christopher McAdoo and Richard W. Humphrey exited the UBS Clearwater, Florida office to join Steward Partners, an independent RIA that custodies with Raymond James. They were brought on board by Dean Hoover, another former UBS advisor who left in 2018.

Tyler McKean and Steven Hafner jumped ship in northwestern Ohio to join True Alpha Wealth Management. That two-year-old firm was founded by former Merrill Lynch advisors. McKean is listed on the Forbes Best-In-State Wealth Advisor list. Both advisors left UBS voluntarily.

Finally, Troy Elser and Ryan Gutowski went over to Bethesda, Maryland RIA Seventy2 Capital Wealth Management. They’re affiliated with the Wells Fargo Financial Network (FINet). The founder of Seventy2, Thomas Fautrel, was an SVP at Morgan Stanley until 2016.

Anomaly, UBS Internal Issues, or Industry Downtrend?
Since the beginning of this year, the total number of US brokers for UBS declined from 6050 down to just under 6000. Is this an anomaly or an industry downtrend? One could assume that it’s due to internal problems at UBS, but they are not the only bank losing brokers.

Registered investment advisory firms are putting a package on the table that’s hard to resist. Kestra Private Wealth Services, for instance, the umbrella RIA for True Alpha Wealth Management offers to pick up infrastructure costs and provide supplies and equipment.

Of course, transitioning from a wirehouse means sacrificing higher payouts. Raymond James’ independent advisor channel offers a complete software suite, including a client portal and online reporting, that is superior to what most advisors see at UBS, Morgan, or Merrill.

Despite the recent exodus of some of their top advisors, UBS does not lead the pack in RIA defections. That honor still goes to LPL, but they have 14,000 advisors on their platform, so it’s to be expected. Due to recent developments, that is also likely to change.

On February 12th, Dan Arnold, CEO of LPL, announced plans to transition a portion of LPL’s resources to offer a pure RIA option for their advisors. Fee-only advisors once turned away for the hybrid model LPL developed, will now be eligible to join the firm.


Dani Fava leaves TD Ameritrade for New Position at Envestnet

The projected exodus has begun. Dani Fava, former Director of Institutional Innovation at TD Ameritrade, left the merging custodian this week for a new position at Envestnet. She will now be in charge of strategic development at the growing financial technology firm.

Industry insiders have been waiting for movement from TD Ameritrade since their merger with Charles Schwab was officially sanctioned by the DOJ in June. According to inside sources, the “restructuring” Schwab has announced will result in multiple layoffs.

Fava is a former VP of Product Management at Citi and a former Senior Product Manager at Fiserv. In her role at TD Ameritrade, she worked on digital strategies, automated rebalancing, and trading technology. She helped to implement iRebal, TD’s inhouse rebalancing solution.

“I’ve joined the team at Envestnet!” Dani exclaimed on her Linked In page yesterday. “Like me, they’re committed to innovation and financial wellness for all. I’m excited to drive this vision forward and I’m committed to staying engaged with the fintech community.”

The new position was initially presented to Fava at the T3 Advisor Conference in February. An accomplished speaker, she had just presented at the conference when she was approached by Envestnet CEO Bill Crager. They were looking for a trend spotter and Dani was their top choice.

“Since our establishment twenty years ago, Envestnet has helped advisors stay one step ahead of the ever-evolving wealth management industry,” Crager stated after the hire. “Dani will help drive advisor and client financial wellness by responding proactively to industry trends.”

This is the second major hire by Envestnet this year. The first was Rich Aneser, a former CMO at Lincoln Financial and former Managing Director at UBS. His new title is “Head of Strategy and Client Development” at Envestnet. Dani Fava will be reporting directly to him.

Orion Overhauls Client Portal in Response to Covid-19 Demands

Meanwhile, Envestnet’s closest competitor has certainly not been sitting on their laurels. Orion Advisor Tech, using technology from their newest acquisition Advizr and onboarding from Apex Clearing, launched a revamped client portal for advisors this week.

“The improved client portal launch followed a demand spike among advisors’ clients for online access to their financial information,” stated Hussain Zaidi, chief strategy officer at Orion. “We’ve already seen a twenty percent increase in portal logins this year.”

The combination of Advizr’s financial planning, Orion reporting, and Apex Clearing’s onboarding and data connections is the closest match to Envestnet’s Money Guide Pro, Tamarac, Yodlee offering. Fidelity’s eMoney merger with inhouse reporting is a distant third.

Greg O’Gara, a senior analyst at the Aite Group, addressed the client portal situation in a February 2020 analysis of fintech applications. “The wealth management landscape is in transition,” he stated. “Covid-19 has turbocharged expectations around digital solutions.”

Envestnet and Orion cater primarily to the RIA and broker-dealer spaces, but both are positioning for entry into the banking sector. With higher demand for client portals and online engagement, will the Merrills and Morgans of the world embrace them? Only time will tell.