Merrill Lynch Makes More Adjustments To Advisor Comp; Death By A Thousand Cuts

Across the industry, last week’s headlines seemed to downplay next year’s changes to advisor comp at Merrill Lynch. From a stand-alone viewpoint, the articles themselves weren’t wrong or misguided – Bank of America made minimal adjustments to overall comp for advisors and teams that matter.

But that’s not the full story. What’s really happening at Merrill Lynch is wealth management version of ‘death by a thousand cuts’. A nick here, a cut there, a bruise over here, all of them spaced out year over year so as to not paint the picture of a beaten prizefighter the day after a career-changing knockout.

It isn’t a stretch to claim that Morgan Stanley is now the standard in the wealth management ‘wirehouse’ game. When did that happen? Two decades ago nearly anyone that mattered started and spent the first decade of their career at Merrill Lynch. Today, they are nothing more than a line item for Bank of America.

In context, annual changes to account size payouts, new bank product sales quotas, and bifurcated ‘who owns this account’ tiers across different divisions inside the Merrill brand (a reminder that it’s just ‘Merrill’ now, not Merrill Lynch, per BofA changes).

So annual changes to comp may be small and on the edges, in totality, the comp grid itself has been revolutionized over the past decade for the now limping ‘thundering herd’.

It makes you wonder, other than retirement induced malaise, why are large teams still at the firm? Expect another year of headlines littered with Merrill departures.

The Goldman Gold Rush Arrives; As Firm Goes Downmarket Its Elite Advisors Are Being Heavily Courted

Goldman Sachs has always been synonymous with wealth in the United States. That almost universal truth will probably never change. When viewing the firm from the outside looking in, you’d think it’s employees, and more specifically, it’s wealth advisors were as satisfied as they’ve ever been. You’d be wrong though.


If anything the firm is going downstream in their services with their interests to merge with traditional B/D’s or small retail firms like United Capital . They also bought Folio Financial—a 20-year-old online brokerage that pioneered the idea of offering fractional shares and customized stock portfolios to investors.


As Goldman has executed several acquisitions over the past 18 months advisors at the firm have begun to wonder why the firm is hell bent on going “downmarket” so aggressively. That term has become a familiar refrain with elite advisors that have left and joined competitors.

It is our belief that the unrest is more widespread than a few departures have shown, and the exodus is about to accelerate. There are more reasons beyond than just a philosophical shift in their customer base.

Competitor firms are offering recruiting deals that have gotten more creative and much larger than Goldman teams are used to hearing. Specifically, AS AN EXAMPLE, ACCORDING TO A RECRUITER SOURSE,  UBS has decided to go ‘all-in’ with Goldman teams and have committed to capital intensive deal components that make it possible to ignore the firm. Needless to say, Goldman teams are listening.

ACCORDING TO ANOTHER RECRUITER SOURSE, Without giving away the full structure of what UBS is doing to command the full attention of long time Goldman loyalists, we do know that they are no longer basing their deal on W2 income; but rather gross annual revenue.

Like we said, Goldman teams are listening.


Morgan Stanley Stuns Big Producers With Audits; Fires More Than 50 Advisors Nationwide

In a sweeping and stunning development last week, Morgan Stanley fired several high profile advisors in San Francisco, Northern California, Boston, and Texas. The dismissals, according to sources, were swift and without notice.

Why were the advisors terminated and what led to the scale of the dismissals? According to several people, we spoke to the actions that were taken based on retirement agreements with advisors that had left the business altogether and may or may not have been getting the full payouts by the teams they left behind.

Morgan Stanley’s auditors have been described as finding ‘discrepancies’ in the product and payout data associated with the teams that were dismissed. To put it more plainly, the mass firings were alleged to be tied to teams not passing on the proper percentage of revenue on retiring advisors’ assets and production.

Morgan Stanley stopped the secret investigation (nobody knew an audit was even underway) once they found irregularities and immediately fired anyone they believed deserved it. The firm didn’t discuss the allegations or give any advisor an opportunity to prove the audit information incorrect or nuanced in some way.

In other words, the advisors were fired with absolutely zero due processes. Blindsided. And as we hear it, a class action lawsuit is being considered amongst those affected. **Also as we hear it, there may be as many as 100 advisors terminated nationwide because of this audit.

Schwab Prunes 200 TD Ameritrade Branches

Following up on comments made last month by Schwab senior executive vice president Joe Martinetto, a spokeswoman confirmed that with the closing of approximately 200 TD branches, the new footprint of the combined firm will include “over 400 Schwab and TD Ameritrade offices across the United States, one-third of them shared offices available to clients of both firms.”

“At present, nearly 90% of Schwab and TD Ameritrade branches are located within 10 miles of one other,” said Schwab’s Alison Wertheim.

“Addressing that considerable overlap will enhance our efficiency, enable us to continue to enhance services and keep costs low for clients,” she said.

The ultimate plan for the consolidation that is expected to take more than 18 months to complete will include more than 150 stand-alone Schwab branches, and about 140 shared branches with Schwab and TD professionals serving their respective clients.

In those shared branches, Wertheim said, “clients will see signage that reflects the availability of both Schwab and TD Ameritrade’s professionals and services.”

There will also be nearly 50 stand-alone TD branches that will continue to serve TD clients.

The 70 Schwab franchise offices will continue to serve Schwab clients. And there are three more franchise offices planned by the end of 2020, Wertheim explained.

“Going forward, there will be a branch within 25 miles of approximately 90% of clients,” she said. “We are confident these are the right steps to build a strong branch network for the future.”

Read the article at InvestmentNews.


The Charles Schwab Corp. said on Monday it was eliminating about 3% of the combined workforces of the Schwab and TD Ameritrade businesses, which accounts for about 1,000 employees, the company said in a statement.

“These reductions are part of our efforts to reduce overlapping or redundant roles across the two firms, but the combined firm will continue to hire in strategic areas critical to supporting our growing client base,” according to the company, which added that the laid-off employees could apply for newly available jobs at the company.

Schwab completed its acquisition of TD Ameritrade on Oct. 6.

The combined firm will oversee about $6 trillion in assets managed by registered investment advisers who used either Schwab or TD Ameritrade Institutional as a custodian.

Senior executives, including TD Ameritrade Institutional president Tom Nally, have left the new enterprise in recent weeks.

Several other high-level departures include institutional product specialist Dani Fava, who now works for Envestnet; Skip Schweiss, formerly the president of TD Ameritrade Trust Cos., who is on deck to become the next president of the Financial Planning Association; and former longtime spokesperson Joseph Giannone, who is joining Dow Jones.

Read the full article here.


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