which can be found here

In a wide-ranging interview with a legal expert in the securities industry, a revelation was made that should send shivers down the spine of every financial advisor.

Brian Neville, a well-known investment and securities attorney who routinely handles dozens of large team transitions every year, mentioned that Merrill Lynch (and others) use artificial intelligence to monitor transactions in advisor bank accounts for potential activity associated with leaving their current firm. Whoa.

After the conversation (which can be found here) we took to confirming the bombshell by speaking to sources at multiple banks. And sure enough, if you have personal accounts at the firm you work for they are watching. And the bigger the firm/bank, the more closely they are watching.

One source had this to say: “The type of activity has been going on for more than five years. The AI is used to scan for all kinds of activity across the entire bank… but adding advisor-owned accounts was an adjustment once the broker protocol exit became a thing. That change removed several legal roadblocks to keeping closer tabs on advisors.”

Another source wasn’t surprised: “This isn’t news to me, but that doesn’t mean it’s right. The environment we work in has become a 50/50 proposition – half of the time serving clients, half the time covering our own ass.”

The response to this revelation has been exceptionally strong. Advisors are looking for options that respect their work and allows them some level of mutual trust with the firm they work for… and this ain’t it.

Specific to Brian Neville and his comments, he added this as a way to combat the surveillance state of a place like Merrill Lynch, “whatever you do, don’t hold cash-heavy positions at your own firm, more so it even makes sense to hold your own investment portfolio away as well. Remove the conflict of interest altogether.”

Good advice, Brian, good advice.

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.

Slow Leak Out Of Bernstein Picks Up Speed; Larger Advisors Migrate To Greener Pastures (mostly to UBS)

There’s been a lot said about the massive shift in private banking and ‘non-traditional’ recruiting over the past several months. Much has been written about both J. P. Morgan and Goldman Sachs teams moving UBS and to a lesser extent, Morgan Stanley.

Add Bernstein advisors to that narrative. In the past 12 months these are the names and numbers associated with transitions away from Bernstein:

Dallas $13M John Baumgarten, Cory Dowell and Chad M. Jones
– San Francisco $7.6M Robert Stoker
– New York $10M Alex Hewit/Mike Tucker
– San Deigo $7M Chis Pitzak
– Nashville Jay Degeare $12M
– Julian McGraph $4.5M

Each of those moves is of note based on the well-known reputations that each advisor had within the Bernstein ecosystem. These aren’t lower-level ‘analysts’ or VP’s. These are Managing Directors of the firm.

A note before we close out this article – UBS is in an absolute tear and is showing ZERO signs of slowing down. Zero. They’ve very effectively taken dozens of J. P. Morgan private bankers, several Goldman Sachs teams, and Bernstein teams. As we hear it, the pressure and focus on Bernstein and Goldman are about to ramp up in the second half of 2021. A pivot, or shift if you will.

It wouldn’t surprise us at all if the same amount of advisors/teams noted above came out of Bernstein in the next six months, increasing the velocity of movement out of the firm. Just expect more headlines.

The narrative and reality with regards to the Bernstein to UBS pipeline are real and worth understanding. The proof, as they say, is in the proverbial pudding.

DOMINATION! UBS Is Hammering The Recruiting Competition This Year, And It Isn’t Even Close

UBS hasn’t found the secret sauce, they’ve perfected the use of Thor’s magical hammer and are pounding away at rivals who’ve yet to figure out a way to match their efforts.

J. P. Morgan in particular is being completely bludgeoned with zero signs of the mass exodus of top talent slowing down. While a few private bankers from JPM have matriculated to Morgan Stanley, more than 90% have taken their talents directly to UBS.

Add those to the Merrill, Wells, and Morgan Stanley wins and UBS is so far out in front of its competition the race seems rigged. But it isn’t… rather it’s a well-executed recruiting strategy that may have seemed risky a year ago but has turned into absolute gold.

A two-fold ‘macro’ decision was made and has resonated in a way that has UBS up by 5X their closest competitor (Rockefeller) instated client asset transfer. As it stands today, UBS is a few bucks away from the first half of 2021 total of $60B in client assets recruited. Amazing.

Can they keep it up through the second half of the year? Not likely. But even if the pace slows, UBS could still end up with a $100B year. Unprecedented.

If you want to define recruiting domination – this is exactly what it looks like.

A Dynamic Recruiting Conversation: “Should we even consider Wells Fargo?”

In a lengthy discussion with a team that seems determined to leave JP Morgan Securities, multiple points of the recruiting and due diligence process were uncovered. Given the depth of the conversation, the highlights seemed to be noteworthy and of value to the wealth management discussion.

With assets under management and revenues at all-time highs across the industry, recruiting is white-hot. Deal percentages are at the highs, while hurdles inside deals are near all-time lows. It is a seller’s market in every way.

Unless…

You happen to be tethered to a Wells Fargo logo. The conversation is much different given the missteps that have come from that firm in the past 24 months. Whether it be fraudulent account openings or a newly minted CEO making racially insensitive remarks, Wells Fargo has stumbled its way to where it currently resides – a recruiting afterthought.

Here is how that conversation went last week:

“Should we even look at Wells Fargo? I’ve heard their deal is big, but will the fog ever lift from that place? Leaving JPM and the brand itself is really our only challenge with client transition – I can’t imagine the extra weight explaining a move to Wells Fargo would entail.”

“Are serious teams really going there or is it just straight-up money grab? It feels like anyone that goes there is striking a massive almost off-book deal. That’s just our perception. Merrill Lynch is probably a more interesting name than Wells at this point.”

Oof. Merrill (a division of Bank of America) is more interesting right now. If there was ever more painful wealth management recruiting take we’ve yet to hear it.

But that is where Wells Fargo finds itself. The biggest deal on the street, paying recruiters up to 10% deal fees, and adjusting deals for teams in any way possible to lure them into the fold.

As the saying goes, “desperate times call for desperate measures.”

Betting On Zero: The Friction Associated With Recruiting Due Diligence Has Dwindled To Almost Nothing

Trends and changes often sneak upon us. We usually don’t see them (or act on them) until it is nearly too late. This is an article to make sure you see a current trans very clearly and don’t let it pass you by.

For the entirety of your career, the idea of engaging in the process of discussing a move to a new firm and walking the pathway of due diligence was a ‘cloak and dagger affair. Taking phone calls off-site, in your car, lunches across town, using clandestine email accounts, etc etc. The stress associated with the process of getting a meaningful offer kept most advisors from pursuing the process.

**CLEARS THROAT** All of that is gone. Gone. Gone. Gone. Due to changes brought on by the Covid pandemic the ease of engaging with firms interested in your services has never been easier. If you want to take a phone call from a rival manager, no problem; take it from your home office and your cell phone. We doubt your significant other is going to report you. Need to take a meeting with department heads important to your book? Again, no problem; jump on a Zoom call from your deck.

The point here is this: the friction associated with the recruiting process has never, ever been lower. In fact, it is approaching frictionless. If there’s anything positive that’s come from Covid associated charges to the industry, this is one of them.

If you are betting on zero and looking to find the best value for your book (with markets and client balances at all-time highs) the ‘climate’ has never been better.

Keep An Eye On The Uptick In Morgan Stanley Recruiting; Dallas Merrill Team Another ‘Competitive’ Win

Morgan Stanley isn’t grabbing all of the recruiting headlines in wealth management these days, but their trajectory is worth noting. Their latest win in Dallas is notable given the competitive nature of the bidding versus rivals old and new.

The terms of the deal haven’t been disclosed but landing a Merrill team doing $5.5M in annual production these days is no small feat. Merrill may be the most heavily recruited ‘away’ firm on the street right now, so every ML situation is competitive.

The group that migrated to Morgan Stanley in Dallas is captained by 39-year vet John Calandro along with his brother and son, Kevin Calandro, and Rob Calandro. They manage more than $720 million in client assets and brought with them admin staff Shea Self and Jonathan Hicks as well as Redding May.

Now here is the competitive bidding part of it – this was a three-horse race. UBS and Rockefeller were both heavy contenders for this team’s services and pushed their deals higher.

A source close to the negotiations had this to say, “each firm had pushed their deals and deal structures to the limit and well past 300%, ML teams are commanding premiums right now.”

And there is the money line: Merrill teams are commanding premiums right now. Including deferred comp balances, the Morgan Stanley deal breached the 350% number. Cha-Ching!!

Morgan Stanley will continue to be aggressive and maybe the ‘belle of the ball’ for the second half of 2021. Get your popcorn ready.

Wells Fargo Rebirth? Even Offering The Largest Recruiting Deal On The Street Isn’t Working

Its well understood that wealth management recruiting is white-hot. White. Hot. It’s a seller’s market as even middling advisors and teams are in a position of strength, commanding premiums on stated deals in the wirehouse space.

So what to make of Wells Fargo’s position? It’s simple really, no matter what they’ve tried (apologies, congressional appearances, new CEO, and executive leadership) the narrative is largely negative. Advisors have nearly zero interest in Wells Fargo as a destination. That’s not an exaggeration, it’s an ‘on the ground’ fact.

Advisors’ current view of the firm is a fallback at best, and a ‘no chance I’d consider them’ at worst.

A year ago it looked like Wells Fargo may have been turning the corner, and then… the newly minted CEO made a boneheaded comment about diversity on a conference call. In today’s corporate environment, that was an epic mistake. Any momentum that may have been building died right there.

Wells has been attempting to employ the ‘money talks and bullshit walks’ approach to recruiting, effectively offering the largest deal on the street. It hasn’t mattered.

Will Wells Fargo eventually make it back to being a meaningful player in the wealth management recruiting landscape? Maybe, but it’s far from certain.

Private Bankers Listen Up! The Difference Between Deals Offered By UBS And Morgan Stanley

Two firms have made the biggest impact in recruiting private bankers away from J. P. Morgan, Goldman Sachs, Bank of America, and Citi. Both UBS and Morgan Stanley have decided that recruiting a different subset of teams from firms that could be called ‘non-traditional’ is worth every dime they can spare.

So what is the difference between what UBS and Morgan Stanley are offering these teams? **a quick reminder that UBS has been significantly more successful in their pursuit of private bankers by nearly 4x versus Morgan Stanley.UBS and Morgan Stanley are near equals when it comes to product, platform, and comp grid payout. The difference lies in the valuation of the business and client relationships that private bankers have built over a number of years.

Here is the money line: UBS is offering a deal based on the gross annual revenue (think ‘scorecard’ or ‘gross credits’) of a private banker or team, and Morgan Stanley is making their offer based on the net revenue (W-2).

Let’s break it down a bit. Currently, UBS will look at a gross credits annualized report for a Goldman Sachs team and put together a 250% deal on the top-line numbers. If that number is $10M, then the deal turns into a $25M deal in an instant.

Morgan Stanley (focused on the net number) will ask that same team for their W-2’s and construct a deal based on the lowest common denominator associated with the ‘trickle down’ revenue model for a Goldman Sachs team. A $10M team at Goldman will have W-2’s that will show +\- $1M. A 250% deal based on ‘net’ numbers ends up making out at $5M.UBS = $25MMorgan Stanley = $5MThe dramatic difference in those numbers makes it crystal clear why UBS is winning private banking competitive recruitment 4-1. Evaluating competing deals that are separated by 5x generally makes the decision simple.

As of today, UBS is the clear choice for private banking teams.