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.

 

SEI Expands Virtual Advisor Educational Programs

John Anderson, director of practice management solutions at SEI, is all-in when it comes to
digital solutions. “Advisors no longer have to get in the car, drive to the office, find a place to
park, and sit in the office for hours,” he stated in a press release earlier this week.

SEI is trying to lead by example when it comes to digital engagement. They’ve implemented a
shorter meeting format for training and offer it exclusively online. They’ve even gone so far as
to replace the inhouse meal they previously offered with free UberEats delivery.

Surprisingly, many advisors turn down the free meal. UberEats offers that are not redeemed
are donated. SEI has given over $200,000 this year to local food banks.

“This is happening at a client level also,” Anderson claims. “Zoom and WebEx meetings are
shorter and more meaningful. Advisors now have the ability to set meetings where they’re not
just dumping data. They can be more engaging to their clients that way.”

It doesn’t stop there. The new mindset extends to recruiting. Prior to the pandemic, SEI did a
two-day in-house training seminar for new recruits. That’s been changed to a “Discovery Day”
that lasts sixty to ninety minutes in an online format.

For current advisors, SEI runs “Webinar Wednesdays,” offering practice management training
and planning tips for both brick and mortar and virtual advisors.

Schwab Offers Full Time Positions to Virtual Summer Interns

Like most financial firms, Schwab moved their summer internship program into virtual mode
this year. Elizabeth King, the SVP for enterprise learning and talent management, reports that 240 interns in over 130 cities went through the program this summer.

“Everyone’s been working in their kitchens and bedrooms,” King said in an interview with
Business Insider this week. “Many of these interns are aspiring seniors in college who will be
offered full-time jobs at Schwab in the upcoming weeks.”

According to Schwab policy, those offers should number over one hundred, roughly half of the
current class of their Intern Academy Program. The positions will be in finance, investor
services, corporate risk management, and technology.

Goldman Sachs Goes Virtual but shortens Internship Program

Goldman Sachs delayed their virtual internship program this summer, choosing to shorten the
program and start July 6th instead of back in June. It typically takes ten weeks of training, hands-on working, and networking with management to cultivate a top-quality analyst prospect.

With the abbreviated time frame and lack of personal contact, the Wall Street investment bank
is experiencing uncertainty over what the internship program will produce this year.

Citi also ran a shortened five-week virtual internship program this summer. Unlike Goldman,
they are being pro-active about hiring. Earlier this week, the bank guaranteed full-time offers to
interns in New York, London, Hong Kong, Singapore, and Tokyo.

Competing banks and private equity firms started much earlier and are also making hiring
decisions. Morgan Stanley was one of the first to offer a virtual summer internship this year.

“Once we realized what the timeline was for Covid-19, it was an easy decision,” stated Jeff
Brodsky, chief human resources officer at Morgan Stanley. “It’s all about execution now. We’re
preparing to make our full-time job offers in the next few weeks.”

 

Regional Firms Continue Recruiting Hot Streaks: 5 Reasons Why The Trend Will Continue

Regional firms have been absolutely crushing it over the past 24 months.

Most prognosticators thought that the fiduciary rule and protocol exit disruptions would disproportionately positively affect independents and RIA aggregators. While those businesses have benefited, the boom has taken place in the halls of Stifel, Raymond James, RBC, Janney, and others.

To drill down a bit, three players have gathered assets like they’ve never done before: RBC, Stifel, and Raymond James.

Here are five reasons why it’s happening.

  1. Culture, culture, culture. Merrill Lynch was an advisor’s dream twenty years ago. Brand cache, a belief in the advisor as to the firm’s revenue center, stock stability and golden handcuffs, the ‘Thundering Herd’, and smart national marketing campaigns. Now, it’s an afterthought at Bank of America. Regional names now ‘feel’ like Merrill felt in the 90’s – entrepreneurial and collegial. Their opinions and client-focused businesses matter again. Culture.
  2. Recruiting deals at regionals are either equal to or larger than wirehouse deals. Just five years ago that simply wasn’t the case. Management at places like RBC saw an opening when UBS and Morgan Stanley decided to de-emphasize recruiting two years ago and reduce their recruiting deal numbers and stepped into the gap.
  3. Executive leadership. As wirehouses have seen significant churn amongst their leadership ranks, regionals have been ‘steady as she goes’. Furthermore, regional leadership has made smart moves and kept their powder dry with respect to the DOL fiduciary rules. They waited, wirehouses panicked.
  4. Demographics. As large scale, legacy teams are at the height of their earning power (and in the midst of a historic bull market), they are looking for a soft landing that won’t nip at their heels with new quotas connected to households, loans and checking accounts. Quotas that if not met take a chunk out of their grid payouts.
  5. Financial crisis residue remains. Wells Fargo is still fighting the stigma of a scandal that is two years old. Merrill is no longer Merrill. Nearly everyone took a big bailout. But regionals don’t even have a whiff of what remains of that stink. No bailouts, no ‘too big to fail’ documentary cameos. It is an easy sell to clients who previously may have questioned a move to a regional name. That question is gone, replaced by ‘could it happen again’ to legacy wirehouse firms.

Add it all up and you have legions of million-dollar producers taking VIP trips to RBC, Stifel, and Raymond James on the regular. And the pace doesn’t look like it’s about to slow. Every single quarter wirehouse headcount dwindles. No new narrative or bloated recruiting deal can compete with the reality of the above.

Regionals will continue to win.

Stifel Recruiting Rebounds

After the departure of their national recruiting head, John Pierce, Stifel recruiting took a bit of a pause. As they circled the wagons they remained engaged with advisors that had been in the pipeline before Mr. Pierce’s departure and the fruits of those efforts have finally found their way to the firm. Via On Wall Street

“The largest of Stifel’s latest recruits is an ex-Merrill Lynch team that managed $935 million. It is composed of advisors Blase Sparma, Stephen Long Jr., Brad Ripplemeyer, and Hampton Ballard. They made the move last week and will staff a new Stifel office in Venice, Florida.”

“Sparma and Long had been at Merrill Lynch since starting their careers in 2000 and 2004, respectively, according to FINRA BrokerCheck records. Ripplemeyer began his advisory career at Smith Barney in 2000, moving to Merrill in 2012. Ballard has spent the entirety of his four-year career at Merrill.”

All in all, Stifel brought in $1.5B in client assets via their recruiting haul, adding several other advisors and teams to go along with the flagship group from Merrill Lynch.

Over the past four years, Stifel has feasted on Merrill Lynch’s legacy teams and advisors. This group adds to that batch of former Merrill Lynch faculty that now call Stifel home.

Beyond Merrill Lynch, Stifel also landed a sizable grouping of Wells Fargo talent across the country. Interestingly enough Wells Fargo has a sizable presence in St. Louis alongside Stifel – so a bit of hand to hand combat on the recruiting front.

Whether or not Stifel can keep up the pace that is set in 2018 and 2019 is yet to be seen, but $1.5B in recruited assets is a great start.

Amidst Pandemic Chaos Big Teams Accelerate Moves To New Firms; We Tell You Why

If it seems like larger and more frequent recruiting headlines keep hitting the tape, you are viewing the wealth management landscape correctly. Each and every week hundreds of millions, if not billions, in client assets are filling out asset transfer paperwork on Saturday and Sunday across the country. And there is no slow down in sight.

The wirehouses continue to be hit hardest as advisors are either opting for perceived greener pastures at a rival firm or setting up their own shop as masters of their inside an RIA aggregator of note. The mass exodus remains real and ongoing, no matter what firm brass at places like UBS and B of A/Merrill Lynch would have you believe.

But we are more interested in why these moves are occurring now…and accelerating in the midst of COVID-19 and historic market volatility. We think the following four dynamics are fueling the recruiting market and have tipped the scales in the question.

  1. Practice valuations and client balances (AUM) are at historic highs.The thought process here is that with client balances at or near all-time highs, annual production levels, along with the stock market, are bloated in ways the industry has never seen before. T12 numbers and their multipliers are extremely ripe and perfectly situated to capitalize on the next dynamic in this list. Advisors would be well advised to take advantage of the gift that the markets have given them.
  2. Recruiting deals are at all-time highs and almost artificially outsized for big teams.The competition for teams of scale is as fierce as it has ever been, and deals reflect that competition. At both Wells Fargo and First Republic, when including deferred compensation balances and choosing to retire at those firms, the numbers can surpass 500%. Yes, you read that right. Deals are more apt to retreat from these levels than to press much higher – another reason why big teams are hitting the bid.
  3. Expired deals.Every advisor and team that mattered during the financial crisis has had the deals they signed back in 2010 (either to stay at their firm or in a move to a new firm) expire. Everyone is a free agent and evaluating the best way to play out the rest of their career – both philosophically and by way of monetizing their book. Besides the two firms that exited protocol in UBS and Morgan Stanley, most advisors are completely legally detached from their current firm.
  4. The COVID-19 effect is real and a significant advantage for transitioning to a new firm.At the outset of the pandemic most thought that the chaos and market turbulence would stifle recruiting movement. Just the opposite has been true. Clients that have stayed home from work are more available to discuss moves and sign transition paperwork virtually; while advisors deal with fewer colleagues attempting to keep their clients at the firm they are leaving. In terms of the drama of the first weeks of a transition, COVID-19 has become an easy off-ramp for exiting advisors.

Doing a serious evaluation of the tent that you find yourself under as an advisor is an absolute must right now. With so many deals stretching beyond 300% and production and asset levels at historic highs, big teams will continue to leave. Considering the factors above and the cover for a transition, you should be doing your own evaluation right now.

 

Rockefeller Continues Recruiting Rush; Lands Another Whale In Texas ($15M Deal!)

Rockefeller remains on a recruiting tear as it launches new locations and lands massive teams from what should be considered rivals now, like UBS, Merrill, Morgan Stanley, and Wells Fargo. The latest trade has Rockefeller landing another big team in Texas for the second straight weekend. As you may recall we predicted this streak and are aware that it will continue: Rockefeller Set To Win Big Over The Next Three Weeks

The details of their latest hall read like this: Rockefeller Capital Management on Friday landed a three-broker team headed by Shay Scruggs,  that generated $5  million in revenue. The group, which includes junior partners Kevin Wright and Trenton Hollas, who have four and five years of experience respectively, oversaw $500 million in AUM.

The group will be part of a cadre of advisors in Houston that are set to open up another flagship office for Rockefeller in Texas. Rockefeller continues to expect to add more and bigger teams in both Houston and Dallas, respectively.

There continues to be a strong drumbeat for three issues that make Rockefeller intriguing. The name itself, Greg Fleming’s leadership, and the tech platform they seem to have nearly perfected. Every single contact we have with anyone engaged with Rockefeller mentions those three points. Everyone.

Recruiting in wealth management is as hot as it has ever been right now. Deals are sky-high if you are a ‘Tier 1’ advisor or team. Competition is absolutely fierce across several levels of the wealth management spectrum.

As an example, what could a $4M team at Merrill Lynch expect to be able to demand from the recruiting market place right now? Assuming they laid their fleece out to Wells Fargo, Morgan Stanley, UBS, Rockefeller, and First Republic? At a minimum the package would ring the bell at $12M; and maximum with deferred matched and back ends met (wait for it…) $20M. In other words, a team situated like that should expect no less than a bidding war and not a penny less than $15M. Yes, the recruiting landscape is on fire.

And Rockefeller is as hot as any name.

 

Morgan Stanley Push: Recruiters Make Claims “…they are being very aggressive.”

Morgan Stanley re-entered the recruiting sweepstakes, post protocol exit, late last year with a bang. After leading the wires (along side Wells Fargo) in losing headcount to the resurgent regional space over the past two years Morgan Stanley has been very aggressive in recruiting large teams away from their rival wires. They’ve had specific success in recruiting away large teams from Wells Fargo and UBS.

There is a good reason why those teams are listening to Morgan Stanley’s pitch. Besides the requisite largess of the firm as a global investment bank that competes directly with the likes of Goldman Sachs and JP Morgan – the firm *dolla dolla bills y’all* recruiting deal is massive. If you play your cards right you cash in to the tune of 250% in the first 4-6 months at your new desk. All in, the firm has been known to pay the biggest and most visible teams more than 350% when you count deferred comp recovery payments. Huge.

Doing a little math – if you are a $3M dollar team in, say, Washington DC the numbers quickly skyrocket. You walk in the door and receive a check for $6M dollars (200% upfront). Transfer 50% of your assets in the first 180 days and you will be handed another $1.5M dollars. By the time you’ve hung a few pictures in your office and have finally figured out how to use the firms CRM software you are $7.5M dollars to the good.

That puts butts in the seats. The total of 250% within your first 180 days at the firm is an eye opener and sets the wirehouse apart from rivals. The low barrier of entry on that extra 50% is a dealmaker as well. Big teams find themselves intrigued by it and finding ways to justify tethering themselves to the firm for the rest of their careers.

Speaking to a long tenured recruiter about Morgan Stanley’s current push:

“They are being aggressive in specific markets with teams that are north of the $2m dollar mark. The aggression largely has to do with the funds added on the deferred comp end of things, but also moving hurdles around to make the deal more ‘gettable’ in the short term. Teams are responding to the flexibility that comes with a 350% deal, most of which you essentially get up front. My guess is that they will remain aggressive coming out of the pandemic and try to scoop up some headliners. I know that is what the current thinking is with Saperstein.”

The pandemic issues have brought a uniqueness to recruiting with a particular set of circumstances that can be exploited. In some specific locations clients are still locked in quarantine and much easier to reach. Reaching them, though, has its challenges as advisors can’t get face to face to process ACAT documentation. Still, the narrative has been that transfers have been swifter based on clients availability and lack of distractions.

Clearly, Morgan Stanley is focused on capitalizing in whatever way they can.

Morgan Stanley And UBS: Non-Protocol Firms Aggressively Stalk Private Banking Teams

A clear narrative is shaping up amongst wirehouse rivals Morgan Stanley and UBS. As both firms exited the broker protocol within weeks of each other their recruiting strategies have begun to mirror each other as well. Both firms have decided that aggressively pursuing private banking teams at the likes of Goldman Sachs, Bernstein, Bessemer Trust, and even J.P. Morgan is a pathway to stability and revenue growth in their all-important wealth divisions.

Over the first six months of 2020, even with the coronavirus pandemic and civil unrest, UBS continues to announce large team acquisitions that hail from the private banking sector. Managers across the US, at the swiss-based firm, have confirmed to us that deal negotiations no longer include private banking discounts – rather, UBS is paying full freight, and then some, for private banking teams of scale. This is a dramatic shift from years of recruiting teams that may include employment contracts laced with non-compete, non-solicit, and even garden leave language. UBS has decided that it is worth the legal risk.

Morgan Stanley isn’t far behind and is quickly learning from its rival that leaning into the private banking space makes a lot of dollars and sense. Morgan Stanley has begun to back away from any discounting of private banking team deal dollars and treating advisors and their teams no differently than an elite level Merrill Lynch recruit. Again, a major shift in both philosophy and execution.

It now looks like the unrest in markets and potential larger-scale disruption to books of business is on hold, but the impetus to switch firms looks to be at or near all-time highs. Why? The nearly 40% haircut that occurred in a furiously fast downturn spooked a lot of advisors and woke them up to the long-term value of monetizing their hard work right now. Adjusting policies around recruiting deals and the who/what/where/why matrix seems to have shifted at both UBS and Morgan Stanley.

So far, UBS is seeing real dividends in landed recruits. We expect Morgan Stanley to follow suit as the year moves forward.

RUMOR: UBS Set To Land Massive Goldman Sachs Team; Could Be $15M+ Rev, $5B+ AUM

There are rumors swirling within the wealth management world that UBS is about to land a massive Goldman Sachs private banking team. Sources at UBS have passively confirmed the potential move with a wink and a smile via text and signaled that we should keep a sharp eye out for a pending announcement.

UBS has taken considerable interest in Goldman Sachs advisors and larger teams over the past six months and ‘leaned in’ to those recruitments inside of the COVID-19 pause in the industry. The expectation is that this particular transaction is pending and will trade in less than 30 days.

As UBS pursues private banking teams they’ve also taken an interest in Alliance Bernstein, and J.P. Morgan. Private banking teams of scale have engaged with UBS often because of the largess of the deal being offered.

Historically these types of teams have been offered discounted deals based on the perceived stickiness of the assets that they manage at their current firm. UBS has decided that those rules don’t apply anymore and are offering ‘wire to wire’ traditional deal terms to pry away the biggest teams.

When this deal finally closes we could be looking at a number larger than $50M in total bonus dollars.

BREAKING: Flagship Merrill Lynch Team in Dallas Jumps To Rockefeller; Bags $20M Dollar Deal

Rockefeller struck a little Texas gold this afternoon when they welcomed a flagship Merrill Lynch team in Dallas, Texas. The PDS Group in Dallas decided to take their talents to Rockefeller and establish a base for growing their current annual revenue from $6M to better than $10M.

The group is headlined by Darrel Preston, Gerald Dahlander, and Drew Swedlund. Together they’ve been at Merrill Lynch since 2008 and doubled their book in that time. The narrative for the move to Rockefeller is much the same.

Given the size of the practice a little math tells us that the PDS group boiled a minimum trade of $18M and potentially better than $21M in the Rockefeller recruiting deal. Rockefeller is known for ‘leveling up’ wirehouse deferred compensation balances; often increasing total deal size on the way.

Over the weekend the PDS group will be racing to transfer accounts and client balances, in the hopes of earning as much of that ‘promised’ recruiting deal as they can.

 

Just another reminder that Merrill Lynch continues to hemmorage big teams and not replacing them. No idea what Andy Seig and the boys are doing over there.