Another Big Team Bails; Merrill Exodus Continues As UBS Adds Another $2B To Their Private Wealth Platform

There is no more anecdotal evidence needed here. The Merrill exodus that was predicted by this author now six years ago has become, as one Merrill advisor aptly put it a few days ago “who’s left today”.

That is where Merrill finds itself. Its advisors check industry publications to see who has left the firm every day.

Not each week, or each month… but every day.

This time the transfer occurred in NYC to the tune of nearly $2B and annual revenue at more than $11M.

Led by Stephen Kincade and Alexander Fridell the team made the transition based “almost purely on culture”, said a source close to the team. Other members included on the team are Chris Kincade (Stephen’s son) and client associates Zach Kingsley, Jessica McEntee, and Elle Schiowitz.

We mentioned in this publication last week that Merrill had lost $200B in client assets in the past four years. Now make that $202B. As big as this team in NYC is, Merrill has lost 100 of them in the past 48 months. Read that again.
It’s stunning… or according to Andy Sieg “it’s seasonal.”

We expect the procession and mass migration out of Merrill to continue as the level of noise in recruiting circles is at all-time highs. The fall has historically been the most active transition period for financial advisors. It will be exceptionally so this year.

Just one more time for effect: “The uptick in advisor attrition associated with competitive recruiting is seasonal.” – Andy Sieg

TWO HUNDRED BILLION DOLLARS: A Legacy Of Failure For Bank Of America And Merrill Lynch

Often times we forget what has happened in the past because we are so focused on the now or the next. Merrill Lynch advisors are currently focused on rumors swirling with regard to new policies, client retention teams, and a looming protocol exit. They’ve forgotten the level of failure that has been spearheaded by their current management over the past five years.

Two hundred billion dollars. $200B. With a B. BILLION. That’s the number of client assets that have left with long-tenured Merrill Lynch advisors in 4 1/2 years. A truly stunning number. Amazing on every level. That number is the equivalent of liquidating the entirety of client assets held at Robert W. Baird.

Put it a different way: Merrill Lynch has lost 100 teams that manage $2B in client assets. Or 200 teams managing $1B in client assets.

When one steps back and realizes the carnage here it is stunning. Truly stunning.

We wonder how a guy like Andy Sieg still has a job. He’s presided over one of the worst drawdowns in the history of modern finance. That isn’t hyperbole. It’s just the truth. And yet, Bank of America has decided that their response isn’t to reassign Mr. Sieg but rather make him more visible with scripts that claim that “recruiting losses are seasonal”.

And to be clear – when Merrill Lynch exits the protocol and presents their advisors with a new set of legal paperwork to sign, the exits will heat up even further.

Andy Sieg: “Everything is fine, nothing to see here…” (and in the background a once iconic Merrill Lynch brand burns)

Bank of America has effectively kept Andy Sieg in his position as a spokesman for what they want to be said when they want it said, and how they want it said. Nothing more and nothing less.

And yesterday he did just that. Take a look at his quotes regarding legitimately crippling attrition at Merrill Lynch:

“For all these positives, there will always be areas needing focus from leadership. Right now, it’s competitive attrition–higher in this quarter than we’d like to see,” said Mr. Sieg.

“Some of the increase can be attributed to seasonal trends, a bit like what we saw in 2019.”

What? Huh? Please explain a ‘seasonal trend’ in advisor recruiting? And has that same seasonal trend extended over a five-year period as Merrill has led all of its rivals in losing teams and client assets?

And what is the plan to combat the rise in attrition? Commercials aired during MLB baseball game broadcasts. Seriously, LOL.

It is a comedy of errors at a place that for half a century set the pace in the wealth management industry. And Andy Sieg is the face of its continued decline.

**A side note: while Mr. Sieg is proclaiming that aggressive advisor attrition is merely ‘seasonal’ Merrill is prepping for a rumored exit from the broker protocol by instituting aggressive client retention teams across the country. The client retention teams were actually announced by the firm last week. All of that to say this – if you’re still at Merrill, why?

SOURCES: Morgan Stanley Is Asking (Forcing) Large Teams And Their Biggest Producers To Sign Retention/Retirement Bonuses

In conversations with two different sources ‘in the know,’ we’ve learned that Morgan Stanley is asking their largest producers to sign what sound, look, and smell like retention bonuses but are being sold as retirement compensation.

Here is the setup from one of our sources:

“Morgan Stanley is telling advisors/teams above $5M to take a payment of 100% of their current T12 and connecting it to their retirement deal. In other words, take about half of your retirement deal (which is 220%) now and sign this document that you are staying and keeping your business here at Morgan Stanley.”

“You can imagine what the unspoken consequences of not signing that deal look like to management. If you don’t take the cash it signals that you are more inclined to leave the firm than stay. Now you’ve got a target on your back. If you dot and I or cross at wrong you’ll get fired. That’s the intention here. So this isn’t a retirement bonus, but rather a retention scheme.”

We spoke to another source that backed up these claims. All of this is being done in a very quiet, closed doorway with the firm’s largest producers. And Morgan Stanley has set a precedent over the past year that they won’t blink in firing big producers – not just for industry violations, but rather internal firm policy violations.

As, effectively, the biggest firm on the street Morgan Stanley management can make these moves. They can put this kind of pressure on advisors and not worry about the cultural implications. Keeping it ‘niche targeted’ to its top 10% or so of producers makes it seem/feel almost like a perk.

Take a step back and consider the cost. What sounds to good to be true probably is – a financial firm doesn’t give money away for free. Think about it.

Read more

If you want further proof that Merrill Lynch (actually it’s just Merrill now) has fully morphed into a bank brokerage we’ve got it for you. They aren’t even trying to hide it anymore.

Merrill announced last week that they are moving all client data away from their internal system ‘O Drive’ and over to Salesforce. Some would think that this is nothing more than a tech adjustment/migration and not really a big deal. That’s simply not the case.

Merrill has led the industry in advisor departures for half a decade now. Five years in a row. One could wonder who’s even left, and why are they still there. But for those that remain this tech move means the noose is tightening.

Migration to Salesforce means three specific things, all in BofA/Merrill’s favor:

1. Salesforce provides significantly more ‘big brother’ control to lock out advisors and instantly eliminate access to client data.

2. Salesforce makes it much easier to transfer client data to other advisors when a team leaves for another firm.

3. Salesforce can prevent data exports and downloads of any kind. The information is locked.

So BofA thinks that locking your client data and technically seizing up your computer the moment you leave, will keep you from leaving. Okay.

But that’s not all. In another announcement last week Merrill confirmed ‘client retention teams’ to be deployed when a team leaves the firm. But everyone reading this knows what it really is – a group of staffers searching for potential protocol violations that would be the basis for legal action.

So five years hence, BofA/Merrill has decided that the right way to handle hemorrhages like attrition and a crumbling culture with an updated CRM and client service calls. This is the kind of genius sort of thinking that can be found at legacy banks these days. Read more

BIGGEST LOSERS! The Biggest Names In Banking And Wealth Management Are Getting Crushed

You would think that name recognition and brand value would still hold some sort of sway in this industry. The numbers tell a different story altogether.

The biggest losers when it comes to high-level talent in wealth management are some of the biggest names banking and wealth management has ever seen: J. P. Morgan, Merrill Lynch, and Morgan Stanley. All of them are taking historic talent losses and client assets are following them out the back door.

But it isn’t all about the headline. Each of those firms is ‘losing’ for very different reasons. Let’s deconstruct the dynamics of each firm.

1. J. P. Morgan – compensation and culture are the big problem here. UBS has decided to exploit those pain points for headliner Managing Directors across the country at JPM. It has worked flawlessly. Yes, recruiting deals and ongoing compensation are leading the conversation; but culture and JPM leadership being completely unable to stem the tide is a bigger issue. Outlook – systemic issues with no end in sight.

2. Merrill Lynch – a slow bleed connected to a cancerous host that is Bank of America. They changed the name to ‘Merrill’ and loaded up advisors with bank products. Every meaningful team that remains at ML is either in discussions to leave or has signed retirement deal paperwork and grinning and bearing it. Outlook – the thundering herd has been slaughtered.

3. Morgan Stanley – this story is very different than the two above. MS attrition is just that; a function of industry churn at the biggest firm on the street. Taking a closer look,
Morgan Stanley has recruited just as many teams and client assets as they’ve lost so far this year. This isn’t a culture problem or a management problem; rather an industry problem. Outlook – current talent drain will slow.

These firms are as high profile as they come and it’s a great study in culture. The way they are responding to the talent losses is very, very telling. BofA/Merrill just doesn’t seem to care, which projects institutional malaise and that the division is not integral to the larger entities’ success. JPM has no idea how to deal with what is going on at the Private Bank; which proves institutional arrogance (and incompetence). Morgan Stanley is dealing with losses by aggressively recruiting from its competitors, proving that the current trend at that firm will subside.

Three biggest losers, three different narratives, three different outcomes.

Departures From J. P. Morgan Private Bank Continue Unabated; Denver And Philadelphia Bankers Find Greener Pastures

The numbers have moved beyond eye-popping at this point. It is no longer an anomaly or ‘normal attrition’ as described in a moment of cognitive dissonance from J. P. Morgan Private Bank’s leadership. We’ve reached levels that should be described as a mass exodus.

More than 10 teams, 50 bankers, and $60B in client assets have left J. P. Morgan (largely for UBS) in the past 7 months. And the pace isn’t slowing. Consider this – there are still large money center cities that have yet to see a J. P. Morgan private banker or team exit. Houston, Chicago, and New York City come to mind. As we hear it, that could change.

The latest moves come from Denver and Philadelphia. Bankers that have spent their entire careers at JPM moved to City National and Cresset.

In Denver, Kevin McGuire chose to join Cresset after a 90-day garden leave. He is joined by Sarah Burney and Jake Schwinn, who will start in August, and Dan Biondi, starting in July.

In Philadelphia, Matthew Salvitti, Tim Pippet, and David Elliott joined City National in June. Their respective careers spanned nearly 40 years at J. P. Morgan Private Bank. They were specifically interested in City National as it is shepherded by Kelly Coffey, former CEO of the J. P. Morgan Private Bank in 2018.

The theme here is that the best and the brightest are leaving the Private Banking ranks. And this is with only one meaningful competitor offering significant upgrades in the comp and recruiting bonuses.

Should Morgan Stanley or Rockefeller enter the fray – the private banking exodus would further accelerate. We hear that both of those firms are seriously discussing doing just that.

WANTED! Two Firms Ramp Up Their Interest In Landing Goldman Sachs Advisors (**and open up their checkbooks to prove it)

Traditional wealth management firms have historically found it difficult to accurately price Goldman Sachs advisors and teams. Most notably, there’s been a ‘play it safe’ strategy that focuses on annual W-2 comp versus gross client revenues generated by the advisor.

One firm has figured out that Goldman advisors have an excellent history transferring assets, as they have remarkable client relationships. So putting together a deal based on just W-2 comp doesn’t make sense. Annualized revenue (or how they would value a Merrill team) is the right way to do it.

UBS has been quite effective at grabbing the attention of Goldman teams across the country as of late, and it looks like they’ve taken a key step in making an even bigger splash: deferred compensation.

As we hear it, Goldman plays games with advisors deferred compensation when they leave. UBS has decided to make that a non-issue and is including deferred comp balances for Goldman advisors in every deal they do. Done and done. No more golden handcuffs.

**This is on top of the 200-250% recruiting deal and the 260% retirement deal UBS offers. So if you’re a Goldman team reading this, you read it right – that’s better than 5x on your current annualized gross revenue.**

Oh, and about the second firm we mentioned? They aren’t totally ready to announce their full intentions with Goldman teams, but when they do, we expect them to make waves across the country. (Name rhymes with Rockefeller).

Rockefeller Deal Ticks Higher, Culture Still Resonates With Biggest Teams From Merrill and Morgan Stanley

Rockefeller has had unquestioned success recruiting big teams. That’s not debatable. Every month multiple announcements find their way into the press proving that fact.

Large teams from Morgan Stanley, Merrill Lynch, and UBS continue to find the story remarkable and easy to sell to clients. Assets transfer quickly and the ‘bespoke’ feel of the firm isn’t just a narrative, but rather reality.

In a conversation with a couple of sources close to Rockefeller, it looks like their recruiting success may tick higher in the second half of 2021. Rockefeller remains highly capitalized and focused on hitting home runs on the recruiting trail.

Leaving direct quotes out of it, Rockefeller has done deals with some of the biggest upfront payments in the industry. That’s part of the reason why they remain selective with who they recruit. The teams recruit and cut big checks to transfer their assets. So there is a clear roadmap.

The above paragraph is a nice way of saying if you’re a big team you’re going to get paid at Rockefeller. Big time paid. They like to win, and based on the current recruiting scoreboard, they keep winning.

So back to the headline, yes, Rockefeller’s deal has ticked a smidge higher, as has their flexibility in constructing deals. As an example, they do a great job handling teams with retiring advisors. That flexibility has made them very successful with Merrill teams.

That success will continue. Also, keep your eyes on Chicago and Denver. Rockefeller has some big things cooking in both locations.

Top Recruiters Describe Massive Deals and Valuation – “Never seen anything like this before…”

In a weekend conversation with two well-known national wealth management recruiters a few very specific themes emerged. As the markets have remained at all-time highs and even hitting new highs throughout 2021 the market for advisors and teams is absolutely white-hot.

We took some time to deconstruct details that are making different teams exceptionally marketable and why firms like Rockefeller, UBS, and Morgan Stanley are having enormous success.

Three themes emerged: client assets have ballooned, everyone is a free agent, and bonuses are sky high while hurdles are at historic lows.

1. Client assets have ballooned to historic levels. “Clients have seen asset prices go to levels that have never been seen before. Even conservative portfolios have doubled and tripled in the past five years. That makes advisor/client relationships nearly impenetrable and assets super easy to transition,” said one of the recruiters we spoke to this weekend.

2. Everyone is a free agent. “Just five years ago more than a third of all big teams and advisors were still locked into a financial crisis-era contract. Now, nobody is. With an aging advisor population that (in the UHNW space) averages 52 years of age, a recruiting deal couple with a retirement package is the ultimate liquidity event. Those numbers climb beyond 550% at UBS and Morgan Stanley. That’s why you’re seeing large and long-tenured teams move,” said a recruiter who’s been handling large teams for more than twenty years.

3. Recruiting bonuses are sky high, while deal hurdles are historically low. “The recruiting departments across the spectrum have figured it out… traditional teams from Merrill, UBS, Morgan Stanley; they transfer their assets and they do it fairly quickly. The need for complex hurdles for assets and revenue that adds stress to a transition has largely been removed. As an example, if you are a large Merrill team and choose UBS you have zero hurdles of any kind throughout the entirety of your deal as well as their retirement package. So 550% completely stress-free. That’s unprecedented in the history of recruiting, and if you look at the data so far this year, it’s why they are leading the industry in transitioning AUM.”

Both of the recruiters we spoke with are set to have historic years that will more than double their best all-time annual numbers; again a function of asset prices and advisor revenue at epic levels. With tens of billions in client assets changing hands the fields remain ripe for harvest and the second half of 2021 doesn’t show any signs of slowing.

One final quote from one of the recruiters we spoke to this weekend: “It’s so active in every front right now. I’m working weekends and nights… so active at the highest levels. It wouldn’t surprise me if the second half of 2021 is bigger than the first half, which is saying something.”

Yes, that would be epic indeed.